How Not To Sell Your House In The 2016 Fall Market

It’s just shocking sometimes how people will mess with a good thing.

There’s a system when it comes to selling real estate in the 2016 market, and while not all sellers and listing agents use it (hence blurry iPhone photos…), I always shudder when I see the results or a seller or listing agent who didn’t go “all in.”

With Toronto home prices at an all-time high, why would you ever do anything to risk getting the most money possible for your home?

Ask the seller of a property that sold for well below expectations, a few weeks back.  I’ll tell you the story…

StillForSale

Perhaps that’s not exactly the right photo to describe this story.

Sellers in other markets get stressed out when they can’t sell their house or condo.

In Toronto, they all sell; or at least, they should sell unless you’re doing something tragically wrong.

But more specifically in Toronto, it’s about how much you get for your house or condo, rather than how quickly you sell, or if you sell at all.

I feel as though this is where a lot of sellers go wrong.

I’ve heard “a house will sell itself” in this market, when people want to discuss the difference between one agent and another, or one brokerage (and fee structure) and the next.

But we’re well past “a house selling” in this market.

If you think that’s the objective, then you’re sadly mistaken.

In this market, it’s about how much money you get for your house or condo, and that number can fluctuate depending on who you hire, and how the property is sold.

It’s the latter part of that – how the property is sold, that I want to examine today.

Because any real estate agent can “put a sign on the lawn,” but as a seller, do you want somebody do what “any agent” can do?

Listing and selling a property for top dollar takes work, it takes time, and it takes vision and expertise.

I have a listing coming out next week that is over a month in the making.

It’s a condo that was in very poor shape, through multiple residents and tenants, and it shows terribly.

I was honest with the seller about this; I said to him “It shows terribly.”

I practice what I preach, you know.

When I write something on my blog, I’m not paraphrasing.

I told him, “For a 10-year-old unit, this might be one of the most beat-up I’ve ever seen.”

And I encouraged him to spend money to make money.

It’s not just that in the condo’s current state, it would be tough to sell, and take longer to sell, but rather it would sell for a hell of a lot less than fair market value.

The kitchen appliances are broken and battered.

The laminate flooring looks like it’s been clawed at by a family of panthers for a month.

The oak staircase looks like the laminate flooring, but worse.

The carpet on the second floor, is, well, carpet, which people hate, but it’s also stained and torn.

And the condo has several different paint colours – not to mention the laminate at the front of the unit was painted white, to look like tile.

My client bought the unit in rough shape years ago, but it’s been tenanted and has fallen into greater disrepair since.

He told me he wanted to sell it, and I told him we had a lot of work to do.

Rather than just bring a listing agreement to meet him, and “put a sign on the lawn,” I outlined a plan of action for the condo.

I wanted to remove all the laminate flooring on the main level, and remove all the carpet on the upper level, and install engineered hardwood.

I wanted to replace the existing/broken white kitchen appliances with new stainless steel.

I wanted to have the kitchen cabinets painted (a real painter can do such a good job, nobody will ever notice), since the cabinets were a mix-and-match of brown and white.

And I wanted to paint every square inch of the condo.  Not half-ass it, and skip closets, trim, bulkheads, bathroom, and laundry like most people do, but give this place a complete gut-renovation, and make it look brand new.

All in, this would be about $10,000, and then we would stage the condo on top of it for about $2,500 (I get great rates on staging – for a 2-storey, 850 sqft condo, this should cost $4,000).

My client didn’t jump at the idea, but I told him that in the condo’s current condition, versus what we would get if he did the work, represented about a $50,000 difference.

Who wouldn’t agree with that?

My point here is not to pat myself on the back for doing something I think every real estate agent should do, but rather demonstrate that there are a lot of sellers who would have just put the condo on the market as is, and a lot of agents who would never have put an action plan into place, and followed through on it.

Earlier in the fall market, I was showing houses to a client that were in the same are, but priced drastically different.

One house was priced at $799,900.

Another house was priced at $949,000.

The two houses were similar in style, size, and character, but they were being marketed and sold quite differently.

The house listed at $799,900 ended up getting twelve offers, and selling for $1,151,000, and I honestly thought it was “worth” around $1,050,000.  I would have loved to see that house around $1M, but I knew it was more in my heart.  Either way, it sold for more than I thought possible, and while that’s not a rarity in this market, it’s better than can be said for the next house.

The second house, priced at $949,000, did not really fit into the typical real estate mold.

They made three major mistakes, in my opinion:

1) PRICE

I know that the public hates the “under-pricing,” but we’re beyond saying that “it works” and now simply talking about what happens if you don’t under-price.

The $799K house probably brought in a lot of buyers under $1M, who never had a shot at the house, but made offers regardless.

These buyers helped push the price higher.  Their “dummy offers” as I refer to them, since they’re not real offers (sorry to say, but an $825,000 offer on this house doesn’t count), but they exist in the eyes and minds of the buyers who are into the high-$1M, and over $1.1M.

Now also consider that when houses are going for $350,000 over the list price, a lot of uninformed buyers simply think, “houses are going for $350,000 over the list price.”

Yes, you read that correctly.  See dog.  See dog run.  Run dog run.

Buyers take what they see at face value, and often assume everything else follows sequentially from there.

But just because one, two, or ten houses sell for $350,000 over the list price, doesn’t mean they all do.

The second house, priced at $949,900, was worth about $1,100,000, or “only” $150,000 over the list price.

But almost every house in this area was being listed ultra low, and I have to think that buyers simply saw this house at $949,900, and decided they couldn’t come close to affording it, and thus they didn’t submit an offer, and the number of offers was far lower than it could have, or should have been.

2) SHOWINGS

I have a tremendous amount of respect for every home-owner in this city who has to endure the home-selling process, as it’s a very difficult, very stressful, very labourious task.

But the task pays off in the end, when you do what needs to be done, in order to get paid.

A lot of my home-sellers (specifically houses in this market) will actually move out when the property is listed, and move back in the night that it sells.  How else can they be expected to survive 80 showings in a week, with people coming early, coming late, and often showing up without an appointment?

Only for the $949,900 listing we’re talking about, the seller simply decided to stay put.

That’s right: he was home for every showing!

This is a tragic mistake on the part of the seller, and the part of the agent!

As I said, I tell my clients what’s what, and if they’re mad at me, and they fire me, at least I can go down knowing I did the right thing.  But so many agents out there today live in fear of losing a client, and thus they pander, placate, glad-hand, and act as “yes men” who simply agree with whatever the seller wants.

If my seller told me, “I’m going to be home for every showing,” I would fight him or her, tooth and nail.

I would tell them, flat out, “You will NOT get the same price as as you would, if you weren’t home.  Are you okay with that?”

Anything short of a “yes,” and the argument would continue until the seller relents, or he or she fires me.

You just can’t be home for showings.  Buyers don’t want to see the home owner, and they surely don’t want to be followed around by him or her (as was the case in this house).

How can a seller not understand that?

When a buyer sees a seller in the house, that buyer wants to leave as quickly as possible.  I often have buyers who will spend an hour in a property, and see if it grows on them.  That surely doesn’t happen when the seller is standing right next to them.

To make matters worse for viewings on this house, there were no viewings allowed every weekday between 12pm and 6pm, which made absolutely zero sense to me.

I would say that 90% of all viewings are between 12-1pm on weekdays (lunch), 5-7pm on weekdays (after work), and on Saturday and Sunday.  So with these restrictions from 12pm-6pm, the seller is pushing away a slew of buyers who might not see the house!

The way that showings were conducted on this house, with the seller being home for all showings, and only after the restrictions were met, I have to think there were a few would-have-been buyers out there that did not materialize on offer night.

3) CONDITION

The condition of the property.

Right.

This is a bit of a weird one, folks.

This house was absolutely gorgeous, on the whole.

It was an 1886 Victorian, in great shape, and with unbelievable curb appeal.

Inside, it got a solid B- for the condition, although the aesthetics were closer to C+.

But the way it showed?

Is there anything less than F?

I’m not sure who the seller was, or what line of work he was in, but every square inch of the house was covered with movie posters and artwork.

Every wall had ten posters where you’d expect to find one.

And while I know, and perhaps you as the reader knows, that beyond all those posters and all that weirdness, is just drywall and plaster, you might be surprised at what goes on in the mind of the buyer.

We’ve streamlined the process so much that you’re better off with an IKEA print of a red, double-decker bus on the streets of London affixed to the wall than you are of an original oil painting.

A house crammed with movie posters and artwork isn’t the same thing as “thinking outside the box” or “peacocking;” it’s confusing and turning off buyers.

So in the end, this house, with the restrictions on showings, the seller being home and following people around, the really crazy decor, and the list price that was $150,000 higher than expected, did not do very well.

It sold for $1,040,000, which is $90,000 over the list price, or $60,000 less than I thought it was “worth.”

But with houses selling well beyond their “worth,” I have to think this house woulda, coulda, shoulda sold for $1,150,000.

Does the seller know?

Does the seller care?

The truth is, the seller will never know what could have been, because you don’t get a chance to try it the other way.

But I know, and a lot of other agents do as well.

“Did you see what such-and-such sold for last night?”

It’s said more often in terms of a house selling for more than you’d expect, but sometimes, it’s a house selling for less.

There’s so much at stake when selling freehold properties in Toronto these days, and this is a classic example of how not to sell your house in the 2016 fall market…

16 Comments

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  1. Joel says:

    I always thought that staging was included in the cost of hiring a broker. Is this not generally the case, or is there a certain estimated home value before the agent pays for the staging?

    1. Ed says:

      $4,ooo to stage a two bedroom condo for a week?
      Seems like a lot.

    2. Kyle says:

      From my own personal selling experiences, it’s a bit grey. Assuming the property is fully clean, decluttered and already presents well, i have had Agents do that last little bit for no charge (fresh flowers, pressed linens, throw pillows,etc), but full-on staging involving a moving truck and furniture is definitely not included. On the other hand things like professional photos, videos, pre-home inspection have all been included.

    3. Mike says:

      There’s a guy in Riverdale who is probably the most successful broker: not only does he do the staging but he includes the landscaping. Not sure if he ends up taking that off the final sale price but I know a number of people have gone with him just because of that.

      Now where is that glass of “wine”?

  2. Gautam says:

    What are your views on the recent tightening of mortgage requirements for borrowers? I thought you would have written a blogpost on it by now. If, as some people believe that it is not the foreign buyers boosting house prices, I think it will cool down the crazy Toronto market with people’s affordability levels coming down.

      1. Geoff says:

        I’m sure he will. I’m also sure that David has a day job that keeps him from up to the minute reporting …. give him some time.

        1. Kramer says:

          Seems like good steps forward to make the market fair. There should be no tax-loopholes for non-principle residents to receive principle residence tax breaks on capital gains. Closing that loophole is FAIR and JUST. So bring it on. It shouldn’t have to do with whether or not the buyer is foreign or a citizen, but simply the law of the land with regard to principle residence tax exemption should apply to all, and now it does. Job well done. If this makes my house worth 5% less I can accept that because it’s FAIR and long term is good for Canada..

          The stress tests seem like a great safety measure to prevent 2008 style breakdowns where the market gets smashed because people have to walk on ridiculous loans that shouldn’t have been issued to begin with. The majority of loans have already been made diligently in this country vs. USA pre-2008, and more stress tests will only strengthen this.

          For Toronto, my humble opinion is that these are great safety measures that will not drastically move supply and demand since this will not impact the well document massively insufficient supply, but rather will ensure that people pay their fair share of tax, and will prevent INDIVIDUALS from getting themselves into trouble by accepting loans they cannot afford. The market will be healthier, even if the price increase slows a few mph. That is better for the country as a whole.

          1. Kramer says:

            PS: GO JAYS GO!!!!!!!!!!!!!!!!!!!!!!!!!

        2. Kyle says:

          I largely agree with your assessment Kramer. but some things i’d point out are the following (and anyone please feel free to correct me if i’m wrong):

          1. Regarding the stress test – the actual posted rate used to perform the test is controlled by the banks, so they have the ability to raise AND LOWER this bar. And my bet is they will lower their posted rates if too many people are getting turned away or their loan volumes drop.

          2. I think the new rules only apply to CMHC insured loans, so the stress test would not apply to privately insured loans.

          Overall i am in favour of the changes because it should ensure those borrowers that borrow “to within an inch of their life” have some buffer for unforeseen circumstances, to actually save for retirement or to pay down their mortgages. But IMO i don’t think the stress tests are really necessary. On a five year term, even the most leveraged borrower finds that over that term their incomes tend to rise gradually making the stretch more easy. And if rates were to rise, the borrower would have a long runway to make any necessary adjustments.

          What i would really like to see is lenders having to pay some sort of deductible in order to collect on CMHC insurance. That would be a good way to enforce loan quality and reduce any sort of fraud.

          As for the impact to the market i simply see this shifting demand from one segment of the market to another (i.e. competition in the 500K – 1M range cools a bit, but competition in the sub 500 range heats up). Overall prices and sales will continue to rise.

          1. Kyle says:

            Just checked, and point 2 is wrong. The new stress test applies to all insured mortgages.

          2. Steve says:

            I haven’t read the finer details of it but with respect to the principal residence exception : if foreigners are not permitted to claim the house as a principal residence , then I would assume any mortgage interest costs should be fully deductible against the capital gain . Only seems fair . Anybody know ?

          3. Kramer says:

            Good point, they definitely should be able to deduct mortgage interest if it’s a secondary/rental/investment property, to be fair.

          4. Mike says:

            The posted rate is set by the Bank of Canada using an average of the big-six banks posted 5-year fixed rate.

            The idea behind using that rate is that bank lending rates are tied directly to bank borrowing rates. As Canadians are all well aware, banks answer to shareholders, not consumers. If they lower the rate at which they lend money out at they’re going to have to lower the rate in which they offer on products like GIC’s et al. Either that or the banks cut directly into their profit margin. Since most bank executive bonuses are tied to profit and not new business there is significant incentive to keep rates the same.

            Where the rules will hurt is for borrowers who go to non-bank lenders. They’ve normally worked on people who had trouble getting loans at banks. Home Buyers are now going to see their monthly payments buy less house but on the plus side more will qualify for bank loans. If anything these rules will push people towards banks. Thus there is no incentive to collude to lower rates.

          5. Mike says:

            Steve,

            Yes, you would be able to deduct your mortgage interest. You always have been but if you do you sacrifice your ability to claim the capital gains exemption. Most of the people affected by this new change are not people who will buy a house and hold it for 25-years.

            This might be the thin end of the wedge as far as governments clawing back the Primary-Residence Capital Gains Exemption.

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