Should The “List Price” Reflect Fair Market Value In 2017?

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…

Sold-Over-Asking-Price

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.

Why?

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”

Really?

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.”

 



“Underquoting: Village Real Estate Fined, Sweeney Estate Agents To Contest Allegations”

January 26, 2017
Kirsten Robb

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…

51 Comments

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  1. Perkie says:

    In Australia you at least get to see in person the other buyers at the auction, so it’s very transparent

  2. Max says:

    Better yet, GTA home owners should be obligated by the government to sell their homes to any bidder who makes a fair market offer on their property, even if their home is not listed for sale. This will have the effect of normalizing prices and it should also improve the behaviour of buyers and agents.

  3. Pete says:

    My only issue with the stupidly low list prices is one David mentions – realtors still use “sold over asking” to promote themselves. Does any other industry allow the sales people to set the price low and then congratulate themselves on selling for more? The agents want things both ways – the bidding wars under listing causes while pretending that selling over asking is an achievement. Just get rid of the list price altogether.

    1. Investor says:

      Public corporations provide guidelines for next quarters results, then blow them out of the water. Of course their stock rockets before the announcement, then collapses after everyone realizes during the earnings call the corp provides lower guidance for the next quarter.

      Pick your investment and go for the long term. I like a mix of 70% Real Estate and 30% Bonds/GICs/ETFs/Cash. Real Estate rentals provide great cash flow and sets me up for the next property purchase whenever the market stalls or collapses. Eventually all investments continue the gradual increase.

  4. Joel says:

    I don’t think that the government should regulate this. I think in a world where realtors complain about offers coming in at list price we see more of a need for home sold data to be released.

    I know that there was a court case about this and I honestly believe that we would see a much better market and less ‘underpricing’ if the public knew what houses were actually selling for.

    1. jeff316 says:

      Under pricing is only a problem for people that don’t do their homework and have bad agents. So the solution is doing your homework and getting a better agent.

      1. ralph Cramdown says:

        But the same could be said for not putting photos on the MLS listing, or not providing a seller-paid home inspection to prospective buyers. Having sellers do these things once is more efficient than making each interested buyer/agent do this for every house they may look at. And obviously, saying “satisfy yourself” or “do your own homework” to potential buyers is going to discourage some of them, one of whom may have been willing to pay the most.

        It’s no secret that most North Americans don’t like haggling in the Arab souk style, where the seller starts at double a fair price, the buyer starts at half, and after twenty minutes of lying to each other, maybe they consummate a deal. Nor that other sales experiences that resemble this — car dealerships in particular — are hated by a lot of people. And how many times have you heard that a buyer put in a lowball offer that was so “insulting” that the seller didn’t even counter? It seems sellers don’t want to play these games either, if they’re on the receiving end.

        1. jeff316 says:

          Pricing is dynamic.

          If a buyer is going to be discouraged by having to assess their finances, look at a few comparables and come up with a price (or range) at which they feel the house is worth their money and works for your budget, then maybe renting is their best option.

          I would argue that everyone is generally fine playing the games, the problem is that everyone wants to feel emotionally secure that they didn’t get ripped off. That’s going to be a risk in any scenario – under/over/exactly priced. This is not about efficiency, this is about emotion.

          (As an aside, the Arab souk style haggle is what another poster on this board is essentially proposing!)

          1. Ralph Cramdown says:

            Buyers always have to assess their finances, so that’s a red herring.

            How do buyers look at comparables? In markets where most houses are priced near the expected sale price, they can do it online. You assume that listings that disappear from MLS in a similar time period to most sales sold near asking, and those that sat for longer probably sold for less. When you needed exact numbers, your agent could supply them. Toronto used to be like that. Not anymore. Asking prices now mean nothing, solds are hard to find for the public, and you need to get sale prices for every sold comparable from your agent. Maybe your agent needs to call the selling agent to see if the buyer was close to the next highest bids, or if he was a “yahoo who threw the boat,” in David’s memorable description. Maybe that distinction isn’t even important. In summary, buyers and owners have LESS information than they did only a few years ago.

            There aren’t many markets that get better when participants’ (and potential participants’) information gets lower. Here and now, even many agents seem to be poor predictors of sold prices.

          2. Libertarian says:

            I’m all for more information when transacting in real estate. Full disclosure. Let’s stop wasting everybody’s time. More and more, that looks like opening up the data on MLS. When is that issue getting resolved in the courts?

          3. jeff316 says:

            List prices were never relevant to smart bidders because they’re were never reflective of the final sale price. They weren’t relevant in the good old days of list-high-hope-and-haggle, and they’re not relevant in the current reality of list-low-sit-back-and-prosper.

            How do people have less data than before? Sold prices used to be a near mystery? Today, how are solds hard to find? I haven’t used a real estate agent for eight years and within 24 hours of a sale completion within a four block radius of my house I have the sold data in my email.

            There are a lot of people that have been really hard done by this market. (And I’m not talking about the handwringing, two income yuppies in the news.)

            People not in the hard done by group: a) buyers that don’t want to spend a bit of time assessing the market, b) agents that have quick and mobile access sold data that won’t pull up a few listings to assess comparables, and c) sellers that underlist and whine about getting a low-ball offer.

            You’re right, there aren’t many markets that benefit from lack of information. The question is how would buyers benefit from increased information in this market? Assuming the benefit is financial is just an assumption.

          4. Kyle says:

            Jeff is bang on here. List Price is an irrelevant number. Anyone who ascribes any sort of value to it, does so at the risk of their own disappointment. No need for Governments to step in because someone invested emotion into an irrelevant number.

          5. Kyle says:

            And as for information, just go to mongohouse,com

          6. Ralph Cramdown says:

            How would buyers benefit from increased info? They’d be far less likely to overpay by “winning” with a bid $100k/5% or more higher than the next highest bid. That extra represents a deadweight loss and, usually, a transfer from poorer people to richer people — which is bad for economic growth as a whole.

            Here’s a radical idea. Buyers decide amongst themselves they’ll hold an open auction at offer night. You might win and you might lose, and the final price might even be higher than what would have been in a sealed bid auction. But every buyer would ensure that he didn’t win by paying $100k more than he had to, the seller couldn’t jerk the winner around with “let’s send them all back to improve,” and losers wouldn’t risk the heartbreak of losing by $1k that they would have been willing to pay, had they only known. Sellers and their agents would be pissed, of course, but I don’t think there’s much they could do about it.

            This works even if not all buyers agree — those who agree hold an auction privately among themselves, and the winner submits his sealed bid to the seller along with those of the holdouts. Fewer submitted bids leads to similar advantages for buyers. Nothing against REBBA ethics rules that I can think of.

          7. jeff316 says:

            Now, don’t get me wrong though – if I were a politician I’d be all over this, because house prices and bidding dynamics are just crying out for the NDP (or Liberals, maybe) to ride to electoral success. But the problem with good politics is that it often misses the real problem, results in unintended outcomes or just doesn’t make for good policy. We’re making assumptions about the good that will come from changes. That good may be emotional and not financial.

          8. jeff316 says:

            Why would they be less likely to overbid? That’s an assumption. Maybe one will just one-up the highest bid? Maybe one of them will just pay $101k instead. Or $105k. Or $110k.

            I find that your buyer’s auction idea really illustrates what I think I’ve been trying to say – that the issue for this crowd isn’t about price, it isn’t about process, it isn’t about efficiency, it is about making buyers feel more emotionally secure about their choices. And that’s fine, but that’s not the big problem we’re facing in this market. (But I might be missing the nuance of your idea.)

          9. Kyle says:

            @ Ralph

            Your real adversary in a bidding war are the other buyers, not the seller….Whom at the end of it absolutely can still send whomever he wants back if he doesn’t like the pre-agreed upon winner’s bid. So your idea only works if all buyers involved are honest, trust each other and comply and don’t use what they’ve learned about everyone else’s offers in their own favour. An Agent representing both seller and a buyer would have a field day. Lots of incentive for a buyer to say one thing to the other buyers while doing something all together differently behind everyone’s back with the seller. Personally, I would much prefer to do my own homework and make my own bid.

          10. Ralph Cramdown says:

            The nuance is in the behaviour of the yahoo who throws the boat, and the consequences. A few years ago, David wrote that, every so often, one of his buyers would get beaten by a yahoo who totally overbid, put it down to fate, and said there’s pretty much nothing you can do about it. Recently, he wrote an article saying that if he lists and stages a house using his patented 7 step process, he can pretty much guarantee a yahoo will show up every time. Although real estate agents joke about these yahoos and the crazy bids they win with, the prices are dutifully entered into MLS where they become the Voice Of The Market [insert angelic choir sound effect], and are used as comps by the next round of buyers, appraisers, and bank HELOC lending departments. That extra $100,000 is tacked onto the yahoo’s mortgage, but is also tacked onto the equity of every other homeowner in Toronto, one of whom will be the lucky parent of yahoo #2, who uses the equity that yahoo #1 injected into Mom and Dad’s house to fund his own down payment.

            I believe that that plus foreign cash are the only explanations for our current mania, as buyers a few years ago were spending everything they had, and the economy hasn’t otherwise made today’s buyers 40% richer than they were.

            I think breaking the Yahoo Price Spiral sooner rather than later would be a good thing for most homeowners and employed people in the medium term.

          11. Condodweller says:

            @Ralph Cramdown I like your radical idea however people are selfish and they are going to step on each other to screw them to gain an advantage.

            I also agree with your yahoo theory about “over bids” setting up new comps. This is why I think there is going to be a correction sooner or later to correct for this. It is a free market for the most part and it will balance itself. Even with low rates and no unemployment issues in sight funds will eventually dry up to pay these high prices which will cause demand to shrink followed by prices. I like the saying one of the money managers has on BNN but I forget his name. He says’s something to the effect of: House prices can’t continue up forever, and what can’t continue, will stop.

            It’s like the reverse of the stock markets back in 2008. Everything was going down for almost two years. People were afraid to invest because they thought it will continue. I recall one analyst saying near the bottom that at that pace the DOW would reach 0 in a few weeks which is not going to happen.

            The problem with house prices of course, is that there is no theoretical limit like that. The more prices get out of whack, the bigger the pull back is going to be.

            I didn’t mean for this to be a comment on the state of general housing market so please save your keystrokes if you believe prices will go up forever…..

  5. Ralph Cramdown says:

    My take on these shenanigans is that organized real estate thinks “buyers are stupid, and we’re going to take advantage of that.” To me this doesn’t square with the supposed obligation to treat all parties to the transaction fairly, but that REBBA rule is only observed in the breach, anyway.

    In most sales jobs, you are NOT looking to attract a lot of unqualified tire kickers who have neither the means nor the desire to transact at a price the seller is willing to accept, but are only going to waste your time. Not in Toronto real estate right now. The obvious reason is that the sale format drives qualified buyers to bid higher if they’re surrounded by broke-ass idiots (and their agents) who think there’s a chance they can get the property at list price if there’s nine other offers. (“So you’re saying THERE’S A CHANCE?”)

    Peering into the addled brains of the qualified buyers, you probably see two types:

    1) “There’s ten bidders and I know one will probably offer less than list, two or three will offer around list, and the rest will put in plausible/serious offers. However, some of those plausible offers will be from people who DON’T realize that not all the other offers will be serious, and so will be higher than they ought. One will probably ‘throw the boat.’ Will it be me? Therefore, I should bid x.”

    2) “Wow, there’s ten bidders. I should bid x.”

    I’m not going to bother looking into the minds who bid around list price, but I will say that maybe their agents are conditioning them to ‘throw the boat’ on another property in the future.

    As a prospective buyer, do you really want to play against these groups, with real money?

    1. Libertarian says:

      I agree with what you wrote and would add that you’ve put into words what David is not allowed to say because he works in the industry.

      I find that whenever David writes about policy, he is essentially criticizing 95% of the agents out there for being unprofessional, dumb, lazy, stupid, etc. This blog is marketing for David, so he’s advertising that he’s much better than the average agent. And by educating buyers about the process and policies, he can get them a house for less money. On the flip side, he can get sellers the most money because he doesn’t look at bully offers and tells buyer agents and their clients that there will be only one round of bidding – winner take all.

      So, if agents would be more “professional” and follow the rules more closely, that would solve all these shenanigans and make real estate transactions more logical than emotional.

    2. jeff316 says:

      “In most sales jobs, you are NOT looking to attract a lot of unqualified tire kickers who have neither the means nor the desire to transact at a price the seller is willing to accept, but are only going to waste your time.”

      Except auctions!

  6. Andrew says:

    If we generally think the list price has no real meaning in the current market, my first preference would be to just get rid of them. In a strong sellers market with underpricing in an attempt to attract multiple offers, it feels like all they do is signal that the seller is expecting a competitive situation. If that’s the case, why don’t we just do that and skip the pretense of a list price at all – just say “we’re reviewing offers on this date” and let the seller make a decision based on what offers they actually get.

    On the other hand, times and markets change, and today’s seller’s market could become tomorrow’s buyers market, and a list price might once again actually have some relation to what seller’s expectations actually are. Maybe a compromise is that you can list at whatever you want, but in the event you reject a registered offer that is above your list price, there has to be some indication that you have done this. It might be because the other conditions were unsatisfactory; maybe it was because you were hoping for multiple offers and a full blown auction. Maybe it doesn’t convey a whole lot of additional information, but it’s definitely better than the current situation.

  7. Paully says:

    If “The Government” would do the right thing and fold up the market-distorting CMHC, then the pricing “problems” would solve themselves.

    1. Joel says:

      Houses selling for $800,000 over listing are not getting help from CMHC

      1. Ralph Cramdown says:

        When the buyers of those houses are move up buyers whose former places are selling for under $1mm, CMHC is indirectly supporting the price, as the first time buyer’s money becomes the move up buyer’s equity. Even if there’s one or two move up buyers in between, the theory still applies.

  8. David (Not the David who runs this website) says:

    I agree that housing prices in Toronto are insane and I will never be able to afford a home in Toronto but I don’t want the government to try to regulate the housing market, it would be a disaster. It would be like saying, “It’s not fair that stock prices of the big 5 banks are way too high for me, so please dear government, make it so that I can buy those stocks at half price …” We all know that would wreck the financial markets and it would do the same to the housing market.

    So how would the government decide on an acceptable price for any given property in the city? I would never want to buy a house knowing that I’d be locked into selling it for what the government decides is fair. Market liquidity would tank in a heart beat if buyers and sellers aren’t free to decide for themselves.

    Sellers should be able list at whatever price they want, see all the offers, and accept whatever offer they want. Unless you’re made of money, losing out in a bidding war over a house maybe a blessing in disguise, given that you don’t really have much time for a detailed home inspection. Home prices should be allowed to respond to supply and demand, they will level off at some point. Nothing goes up in price forever, whether it’s housing, stock, or commodity prices. I’m not saying that there’s going to be a market crash but then it also makes no sense that prices are going to the moon.

    1. Condodweller says:

      Comparing house prices to a stock price is not exactly comparing apples to apples. 1 Royal bank share is the same as another Royal bank share (within the same class of shares) and stock markets have such high volumes (wrt bank shares) that this kind of thing would never happen.

      Besides, we are not asking the government to fix prices. We are just asking to make the sale process fairer. Forcing someone to accept a price they offer at would not change supply and demand nor the free market.

      BTW I find it funny fault can be found even in an open auction that one would think is transparent and fair.

      1. Geoff says:

        I think you need to read about how auctions can be gamed, from manipulating emotions, to fake bidders, to more elaborate schemes.

      2. jeff316 says:

        Requiring that someone accept an offer for their house if it is over asking would drastically change the market – it would change pricing habits, selling structures, bidding strategy and buyer habits. It’s the only thing madder than what we have now. (PS – Geoff is right re: auctions. They’re a total game. Plus, many things that sell at auction don’t end up completing their sale, due to conditions.)

  9. Jeremy says:

    As a recent home buyer (mid January) I would have been in favour of knowing that there is a list price that I could actually purchase the house for. Granted, that number would likely be made artificially high by the listing agent, but just knowing that I could actually have the power to trigger the sale would be nice. I don’t know if this needs to be legislated though, it could be more like a BUY NOW feature, like on eBay. (Obviously assuming you meet all the conditions the seller wants)

    1. Geoff says:

      From a selling perspective, I’d never include a buy now feature – why should I set the ceiling? Buyers set the ceiling.

      I think what you’d see is buy now settings at $4M; list price at $1M.

      1. jeff316 says:

        Exactly. I think all this underpricing is lame but it’s certainly better than overpricing. I’d rather negotiate up than down!

  10. Nick says:

    Do we not have a similar practice to this? From my understanding once you have rejected an offer it is the Realtor’s responsibility to adjust the price on MLS.

    Example, house lists on MLS for $500,000, receives a bully offer or $600,000, bully offer is rejected but since its clear the sellers will not take less than $600,000, Realtor adjusts MLS listing price to reflect that house is no longer offered below $600,000.

    In a market like this one you can’t really pinpoint every single time someone has under priced a listing. My complex for example in the East End. Could not get anything sold above $400,000 last year. Till December, the highest sold price was $390,000. In February we have now had two properties listed at $399,000 that sold for over $530,000. Its not under priced on purpose its just how fast this market is changing/increasing in a lot of the cases.

  11. Condodweller says:

    The phrase “perception is reality” comes to mind when this subject comes up. It’s true, agents should be aware and should be able to explain the practice of underpricing to their clients and yet if the perception among buyers is that it bad and something needs to be done about it then that’s reality.

    Underlisting is a bit of a gamble for sellers because in the odd case where they don’t get the multiple offers with an above the expected price offer they are in a pickle except now they have a safety valve (they simply don’t accept the offer). IMHO the most effective and fair way to level the playing field between buyers and sellers, without hurting sellers) and perhaps get pricing under control is by making any above list price offers legally binding. I have said this before.

    1. Geoff says:

      but… all offers are not created equal…. even an offer above listing may have a list of conditions attached to it that make it less attractive than a lower priced offer.

      1. Geoff says:

        and how would you propose to make an offer from a seller, legally binding on the buyer, sight unseen? how would that even work?

        1. Condodweller says:

          “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?” I interpreted this as a property being listed below market value and having one offer at the list price. My biggest issue is that if I make an offer at the list price then the seller can refuse to sell to me just because they didn’t get a high enough offer. If there are several offers and they chose to take the lower one due to more favorable conditions I have no issue with that.

          I’m not sure what you mean by sight unseen.

          All I am saying is if a person lists at a certain price he/she should sell at that price. There should be a dealing in good faith component to these transactions. If you ask 1 million for your home and I agree to pay it, it makes no sense for you not to sell it to me. Unless you are dealing in bad faith. You shouldn’t have it both ways. If you take the gamble to under list in order to generate interest and spark a bidding war to get a higher than fair price for your house, you should accept the consequences when it doesn’t work out in your favour.

          If there was a law that you had to accept the offer people would have to weigh the risks and most likely would not list significantly below market value.

          1. Geoff says:

            But all I’m saying is that price is part of the offer, not ALL of the offer. You offer list price but require a 30 day closing, provide a $400 deposit cheque, and also say you want my lamp in my living room (not part of the listing) – shouldn’t I have the right to take the offer that maybe is lower, but includes a $50,000 deposit cheque, and sounds better? And yes, you will say that the offer should list all these requirements — but then what about if you plan on tearing my house down, whereas the other buyers are a family and want to keep my home as is forever? Yes you’ll say that’s me being sentimental, but can’t I be sentimental too? It’s my house, I’ll sell it to whoever I want 😉

          2. jeff316 says:

            Geoff is right. It is not workable nor fair, and would only lead to a whole host of other problems.

          3. Condodweller says:

            @Geoff If my offer is the only offer you have, you should be happy with just about any condition I put in. Don’t forget you don’t have any offers which leaves you in a weak bargaining position.

            @jeff316 You are right in that it wouldn’t be workable as the government wouldn’t be able to force someone to sell, not in Canada anyway. Why wouldn’t it be fair? If everyone knew the rules, they can avoid problems by pricing their homes close to FMV and nobody would get hurt. Which is what we would like to see happen.

            For the sake of discussion, what are the “whole host of other problems” you are referring to?

            Realistically, whoever governs re agents’ conduct, ( is it RICO?), would be in a position to make it part of their ethics and not allow agents to significantly underprice properties. That should work. You say auctions can be gamed; pricing low to generate interest and get an unnaturally high offer is gaming the current process.

          4. jeff316 says:

            So if the offer includes the lamp his nana brought over from the old-world, or the fancy wall unit he custom ordered or a requirement that he lower the basement he should have to accept that because that’s the only offer? And if not, how do we enforce this forced sale rule? Who weights in to say when a property should be sold and when it shouldn’t? And how will the market react to a this requirement? By rampant over-pricing. That’s just as bad as underpricing, with the added benefit of working better for sellers. Instead of bidding from an arbitrary low point until you’ve reached your max, you want all prices to be over-priced (to avoid the forced sale requirement) and instead start from an arbitrary high point bidding down til you’ve reached the seller’s limit?

            Enforcing under pricing is a different question, altogether. Less problematic than the idea of forcing a sale (to be fair, you’ve acknowledge that was never possible.) But honestly, how would you enforce requirements regarding under-pricing? How can you tell when something has been underpriced or the market dynamics have changed? How would you discern an under-priced listing from another one that had a unique offer? What is underpricing anyway? 5 percent below sold?

            I get that this market is frustrating. And I get that it’s not fair. But the lack of fairness is in the elderly pushed out of their homes and the low-income earners that will never own and the families whose income earners have to commute four hours a day to barely be able to afford something, and not because the system’s inefficient means that entitled buyers and/or lazy agents can’t win or that double income Dave and Debbie find it stressful to lose out on their latest “forever home.”

          5. Condodweller says:

            Ok, it looks like you have separated the problem into two issues, one forcing someone to accept an offer at asking price and two how would it work and how it would be enforceable. You are also assuming that if could eliminate low asking prices the pendulum would swing to the other extreme and we would end up with over pricing. I think there is a consensus on that over pricing is bad as it will not generate any offers since buyers will just ignore the listing. Therefore, I think the effect would be that people would list near FMV or slightly below to generate offers and start bidding up from there if there are multiple offers.

            Forcing someone to accept an offer would be a tool to get people to list near market value. It’s a means to an end. I’m not advocating forcing people into deals they don’t want. However, I am sure I’m not the only one who would be very annoyed if my offer at list, or even above list would not be accepted by the seller just because his ploy did not work. Low list prices should just not be allowed which would eliminate this situation since the closer to FMV the list prices is the more likely the seller would accept an offer at that price thereby reducing the occurrence of rejected offers at list.

            As for what would be considered low should be easy to determine. 5% sounds about right at current prices but 20-30% that we see regularly now wouldn’t.

            You are digging in the weeds a bit with the conditions of the offer. I was talking about a normal offer with the usual conditions. I wouldn’t ask for unreasonable requests like the ones you mentioned.

          6. Condodweller says:

            Regarding your comment on seniors being forced out of their homes. I doubt many are as I think they are more contributors to the problem if they bought their homes for $20,000 and are now financing their kids/grandkids to buy their homes.

          7. Ralph Cramdown says:

            Little known fact: Under a standard listing agreement, if a seller doesn’t accept a more-or-less-normal offer at or above list price, the listing broker can demand that the commission be paid anyway.

          8. Condodweller says:

            Yes, I am aware of this, I read about cases where agents sued the seller after he brought qualified buyers but the seller backed out. But I would hope that an agent wouldn’t be that much of a scum bag that he suggests a low listing price and when someone offers it and the seller doesn’t accept it he turns around and sues him.

          9. jeff316 says:

            Re: conditions, conditions aren’t weeds, they are critical to home sales. You can’t propose forced sales based on list prices based on “normal” conditions because there is no “normal” or standard.

            Re: overpricing, if you’re forced to sell your house at any offer above list you are for sure going to put your highest, best hope price on the house to avoid tieing your hands.

  12. Geoff says:

    Personally I think listing prices should be just abolished. As you note they no longer correlate to reality, so have no validity. Plus, as I’ve said on other blogs, there’s more to a house sale than a listing price – an offer at listing price with a 3 week close is not by definition better than an offer at 3 dollars below listing price with the desired 60 day close.

    1. kd says:

      They should just mandate the list price can’t be below the MPAC value. That number is pretty off but it has the advantage of being readily available and drawn from a comprehensive algorithm. All properties are also more or less equal.

      For the small number of rural and other properties where the MPAC numbers is higher than market value, this approach might also actually push MPAC to have more accurate figures.

      1. T says:

        Good idea.

        1. Geoff says:

          Isn’t that MPAc updated every 4 years or something?

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