And the million-dollar follow-up question is: should the seller be, in any way, forced or expected to accept an offer at the list price?
After Wednesday’s discussion, which spawned a near-record 129 reader comments and counting, perhaps yet another conversation about government intervention in the free market is overkill.
But I know that the public hates the idea of the “list price” in Toronto not reflecting anything resembling fair market value.
So let’s look at what’s happening in Australia, and see if we can come up with a hybrid solution…
I’m not a big “stats person” when it comes to marketing myself in real estate.
In a world where our faces litter billboards, park benches, and garbage bins, you would think that personal stats are merely an appetizer.
But only after I noticed an increasing number of people asking where I “rank” in Toronto, within my company, within all GTA Realtors, etc., did I start to include a stats page in my listing packages.
That’s the only stat I’ll include, however.
And part of the reason stems from the fact that so many of the stats that Realtors have historically used, are completely and utterly useless.
“Average Days On Market”
What a completely useless personal statistic to tout.
My average days on market is probably around 5.5.
Because I list every property on a Tuesday, and review offers the following Monday. That’s six days.
And maybe one out of every ten listings I have sells with a bully offer in the first 1-2 days.
So if I had to guess, I would say I’m averaging 5.5.
Is that good? Bad? Does it matter?
In this market, I’m doing work on listings 3-4 weeks in advance, so that I can sell the property six days after listing it – on the scheduled offer night.
How long you’re on the market is of zero relevance in 2017, especially if you’re doing things right, and spending 3-4 weeks to prepare.
“Sale to List Ratio”
This is relevant, how, exactly?
Most agents out there have a stat advertising their average sale-to-list ratio, but to me, it’s like advertising just how much you’ll under-price a property.
I think in another market, where properties sell below the list price, this stat is relevant.
But in Toronto, the stat is absolutely laughable.
For as long as I have been in the business, houses have been “listed” at one price, and sold at a price that is, more often than not, higher.
The “offer date” was around before I got into the business in 2004, and as we have discussed in the past, it’s necessary in this market, where demand massively outpaces supply, where you want to expose your property to the market for a reasonable amount of time so that people can get in to see it, and because you know you’ll have multiple offers.
But what does the “list price” really mean in this market?
It is, for the most part, a starting price. It’s a mere guideline. And often at times, it’s a completely arbitrary number.
There was a big story in February about the Don Mills house that sold for almost double the list price – $2,300,000 sale price, listed at $1,190,000 list price. I remember thinking, “Who cares? So it was stupidly under-priced, big deal.”
I was in offers on a house on Chaplin last month that sold for $850,000 over asking.
I have an offer tomorrow on a house in High Park that should go $600,000 over asking.
The asking price, or list price, really has no meaning in this market.
Buyers and onlookers often lament that the list price is “misleading.”
But is it?
If you know the first thing about Toronto real estate, you know that the list price has no meaning.
So if you find the list price to be misleading, then maybe you are the problem, and not the price?
Or are you of the camp that, as per Wednesday’s conversation, “the government” should come in and regulate list prices as well?
A reader sent me an article from an Australian webstite last month, that detailed punishments for a practice called “Underquoting.”
“Underquoting” in Australia is when an agent lists a home at a price less than:
1) The seller’s reserve price.
If a seller discloses the price that they would accept, then the agent cannot list below that.
But since the seller often doesn’t know until the day of the “auction” at what price he or she would sell, then the agent can use an estimate, and work around this rule.
2) The estimated sale price.
When signing a listing agreement in Australia, the agent must include an estimated sale price.
This must be based on recent sales and market conditions, and updated when things change.
3) Offers previously rejected by the seller.
A property cannot be advertised for sale at a price lower than any offers the seller has already rejected.
So being armed with that information, consider this article as it appeared on an Aussie real estate site called “Domain.”
Agents knew the owners of a period home in Seddon would not consider selling their renovated property for anything less than $950,000. They even rejected an early offer of $900,000. But when it came to be advertised for auction, hopeful buyers were led to believe offers above $770,000 were still on the table.
In the latest legal action against underquoting in Melbourne, Village Real Estate’s Newport directors have admitted the office last year advertised a property essentially $180,000 below the price they knew the owners would take.
The admission follows a state government crackdown on one of Melbourne property’s most frustrating practices, ahead of a shake-up of the 36-year-old legislation governing the way property prices are quoted in Victoria.
Property Express Pty Ltd, trading as Sweeney Estate Agents Footscray/Yarraville, will also face a tribunal after Consumer Affairs Victoria alleged the office underquoted numerous properties.
A string of agents have been stung by taskforce Vesta, set up in 2015, including Hocking Stuart Richmond, handed a record $330,000 fine in the Federal Court last October. In a case settled earlier this month, Hocking Stuart’s Yarraville franchisee admitted to a vendor it deliberately underquoted to get buyers interested.
Village Real Estate directors Marty Rankin and Huss Saad accepted a $15,000 fine as a part of an enforceable undertaking regarding the Pilgrim Street property in Seddon.
The three-bedroom house was advertised for as low as “$770,000 plus” in January last year, despite agents having already rejected a private offer of $900,000 the previous month and having been advised the vendors would not consider anything below $950,000.
A crowd of about 60 people watched three young couples fight for the keys at the subsequent February auction, after the advertised price was revised to “$800,000 plus”. Auctioneer Mr Saad announced to bidders they were “playing for keeps” — suggesting it had reached its reserve price — at $950,000. It sold under the hammer for $995,000.
“Our guys mucked up,” Mr Rankin said. “As soon they knew where the vendor’s expectations were, they should have raised the price … we’ve taken this very seriously.”
He said underquoting was an unfortunate byproduct of “overquoting” — where agents initially overestimate the sale price to vendors in order to stay competitive and secure a listing. The office has since implemented a comprehensive quoting system that goes “above and beyond” the state government’s new legislation, set to come into effect on July 1.
The Andrews government’s drastic overhaul of advertising will ban common words and symbols “$800,000+” and “offers above $800,000”.
Meanwhile, Sweeney directors Darren Dean and Dean Johnson will defend numerous allegations in the Victorian Civil and Administrative Tribunal later this year, including making misleading representations about the price of five properties. Mr Johnson previously had his licence suspended by VCAT for underquoting in 2011.
“While we intend to defend our conduct, we do acknowledge that on occasions we have not had adequate processes and systems in place to manage the work flow of our busy office,” a spokesman said. “We note there was no consumer complaint to originate this matter and this action has resulted from alleged technical breaches.”
An internal audit of systems and procedures had been instigated and a compliance manager had been appointed, he said.
Consumer affairs minister Marlene Kairouz said the latest action reiterated underquoting was not a smart sales tactic and new laws would help ensure house hunters did not waste time and money on properties they could not afford.
Whenever people get frustrated with the Toronto real estate market, they point to other markets around the world and how they transact in real estate, and suggest we should follow suit.
Australia’s system has its faults.
And there’s no worse system on the planet than in London, England, where you can be “gazumped” at any time. I wrote a blog about it in 2015, which you can read HERE.
So what I’m interested to know from you guys today, is: do you think “the government” should regulate listing prices in Toronto? Or should we continue to use our current system where, dare I say, only the uninformed buyers feel that the “list price” represents fair market value, and thus are the only ones who are shocked (outside of the media who love writing the same story, over and over) when properties sell for “way” above asking?
Have your say…