Just when you thought that the real estate market was at the maximum level of frustration, it’s as though Realtors found a new and improved way of pissing people off.
While the rampant under-listing of properties that led to multiple offers on every single listing was frustrating to no end for buyers, the new trend that’s resulted from changing market conditions may be bothering buyers even more.
I’ve never seen so many properties being re-listed at higher prices in my career.
Let me explain what’s going on, and how we got here…
We’re in a really, really weird market right now.
The market has changed, but that doesn’t automatically mean that prices are down.
To be honest, I do think prices are down – a smidge.
There are still houses selling for 140% of list price every night. But not as often as was the case in February and March.
April was a “transition month,” and I’ll blog about this next week in a separate, dedicated post.
But in any transition, people can be slow to adapt. And right now, it’s the sellers, and the listing agents that are not just slow to adapt – they’re downright refusing to.
Listings are up in May, and whether the number of buyers is the same, or whether there are more buyers on the sidelines taking the “wait-and-see” approach, remains to be seen.
But I also think that with the hottest January/February/March on record, a lot of the would-be spring buyers, have already bought.
More listings, fewer buyers.
And this does not lend itself to the tradition of listing low, getting multiple offers, and selling for insane list-to-sale ratios.
Over the last decade, it’s been easy to take a $1,000,000 house, list it for $799,900, get six offers, and sell for $1,000,000 or more.
But this “transition” in April has led to a significant change, not in terms of price, but rather in terms of process in the month of May.
I started to notice this in the last week of April, when a few houses that would have, could have, should have sold, did not.
These houses were subsequently re-listed at higher prices, the day after the scheduled “offer night.”
I had a listing on the east side around that time, and we got lucky – with a bully offer for $200,000 over our list price. But all the houses around us? It was Re-List City, and we were living in the heart of it.
In fact, as we approach the end of May, what I’m seeing is absolutely shocking.
I would estimate that 1/3 of all houses, priced between $700 – $1.2M, are being re-listed at higher prices, after their failed “offer nights.”
And it’s making the market even more manic than it was when we had under-listing, offer nights, and multiple offers.
Who would have thought – as bad as things were, it could actually get worse.
So what’s going on out there?
I’ll give you an example.
A seller has a house that is worth around $1,000,000. In January, February, or March, the seller would list low – perhaps $799,900, hold back offers, and schedule an offer night.
On offer night, because there was so little on the market, and so many more buyers, that listing would pull, say, 8-10 offers.
And the house would sell for $1,050,000, which is more than the seller thought it was “worth.”
This is the way things have been for the better part of my 13 years in the business, and up until now, the market has been so efficient, that a seller and a listing agent don’t need to figure out what the property is worth, and risk under-pricing and leaving money on the table. Instead, they’d list well, well below anything resembling market value, hold an auction, and let the buyers figure out what the property was worth.
So what’s happening now?
With less activity among the buyers, we’re not seeing 4-5, or 8-10 offers on “offer night.”
And the owner of the $1,000,000 house, that’s listed at $799,900, is either getting 1-2 offers, the highest of which is $860,000, or getting zero offers, because buyers want to see if the house comes back onto the market the next day for a higher price, and if so, how much.
Face it – no seller of a house “worth” $1,000,000, listed at $799,900, is going to sell to the one person who shows up at the bargaining table, with a offer of $799,900. Hate the game, hate the players, call it unfair and unethical – I won’t disagree.
But you wouldn’t sell if you were in that position; nobody would.
Now ask, “So what then, David, why are these people under-listing? Why are they free to play these games?”
And I would answer, are these “games” any different than the ones sellers have been playing for the last 15 years?
And to the first question, why are they under-listing?
That’s the real conundrum. And I think the reason is threefold:
2) Inability to change
3) Lack of experience
The sellers are afraid of leaving money on the table. What if they listed their $1,000,000 home for (gasp!), $1,000,000, and somebody showed up the first day with an offer for the list price? The seller would feel like he or she could have, would have, or should have got more. With an “offer date,” they have that opportunity, even if it’s not working in May of 2017, they’re going to try it.
The sellers and the listing agents are both unwilling, and unable to adapt to a changing market, where listing at fair market value, instead of playing games, is more likely to get your house sold.
And the listing agents, who for years have had no idea how to price a house, but have simply been holding an auction with a “starting bid” of 20% under fair market value, still don’t know how to price houses, so they feel the “list-low, hold-back” strategy is the best way to go.
And all the while, the buyer pool is sitting back and trying to make sense of this.
So too are a host of buyer agents, myself included.
Now I mentioned off the top that properties are being re-listed “at a higher price” the day after offer night.
But what about the ones that are waiting?
Here are two stories that will add more fuel to the fire…
A particular house on the east side, that looked like it might compete with my listing a few weeks back, had offers on May 2nd. And on May 3rd, the listing still said “Offers Reviewed on Tuesday, May 2nd, at 7:00pm.”
On May 4th, the listing read the same.
And on May 5th.
And on May 6th.
And buyers kept wondering, “Are they really listed for sale for $874,900? Or are they going to re-list higher?”
Buyer-agents called the listing brokerage, and nobody could tell them what was what.
The listing agents spoke in generalities, and euphemisms. “We’re open for business,” one of them told me. “We’re evaluating all their options,” she added. And then the classic fail-safe: blame the client. “We’re going to do whatever our seller-clients feel is in their best interest.”
And on this went.
May 7th, May 8th, May 9th – the listing still read, “Offers Reviewed on Tuesday, May 2nd, at 7:00pm.”
And on May 11th, that listing was terminated.
But how many buyers wasted their time going to see the house, listed at $874,900, when all the while, the seller probably had no intention of accepting that price?
If you like that story, then let me double down. And I should add, by “like,” I actually mean hate.
There was another east-side listing a couple of weeks ago, listed at $849,900, that passed its offer date, and didn’t sell, only this listing was updated and the “Offers Reviewed On….” part was removed.
I called this agent and asked point-blank, “Is the property available for sale?” He said, “Yes.”
I asked him, “What’s going on with it? I mean, a lot of agents are re-listing at higher prices, and I want to get a sense of where you stand.”
He said, “We like where we are, go have a look.”
And so we did, my clients and I, and we loved the house!
Who wouldn’t? This house had to be worth $950,000 – $1,000,000, and dare I say in February, it would have received six offers and sold for over $1M.
So we made an offer, and by the time our offer was submitted, eight days had passed since the listing was updated to remove the verbiage about the “offer date.”
The agent, who was no slouch – he’s done 43 transactions in the past 12 months (I have a program that can look up any agent), albeit 42 of them outside the city of Toronto, didn’t get back to me regarding our offer for almost 24 hours. When he did call me back, he complained that the offer went to his junkmail, and that I only gave him a 24-hour irrevocable (which is actually an eternity in Toronto).
I didn’t hear from him after that.
A day later, I called him, and he said, “I’ll meet the sellers tonight. This noon-irrevocable garbage, what is this? Like my clients don’t have jobs? You should give people till midnight so an agent can meet his clients for dinner!”
Weird. I guess he’s never heard of email. Or the phone. Or DocuSign. Or the year 2017…
In any event, I didn’t hear back from this agent, which was utterly bizarre.
The next day, the listing was increased in price to $999,999.
And I never got a call back from that agent.
It was a strange way of doing business, and dealing with colleagues, but that part of the story is just for kicks.
The bigger problem here was that this property was listed for sale for $849,900, for eight days, when all the while, the sellers were going to increase the price.
And even though I brought the listing agent an offer, knowing full well, with paperwork-signed (probably in-person, at the Swiss Chalet in Bolton), that they would be re-listing for $150,000 more, the agent never though it prudent to tell me this.
Just absolutely, positively, bizarre.
Every day out there, we’re seeing houses re-listed for more than the price at which they were previously under-listed, which in itself, makes little sense.
The problem as I see it, is that sellers don’t want to show their hand. They don’t want to show the buyer pool what they’re expecting, and what price they want, for fear that there’s a buyer out there that would have paid more.
And the bigger problem, in my personal opinion, is that at some point, “false advertising” guidelines simply must apply.
When sellers list their $1,000,000 property for $799,900, with an “offer date,” they’re effectively saying, “This is an auction, $799,900 is my starting bid price, see you on offer night.” Most of us have come to accept this.
But when sellers are leaving the listings up on MLS at $799,900, for days or even weeks, allowing buyer agents and buyers alike to view the home under false pretenses, with a plan to increase the asking price, then how is this not false advertising?
The listing-and-re-listing is out of hand.
And while I accept a “transition period” is necessary for 4-6 weeks, if this continues through May and into June, then the whole thing is a farce.
I’m going to spend some time on the long weekend going over listings in April/May, and trying to get some actual quantifiable data about re-listing.
Yes, that is how I’m going to spend my long weekend.
I’d use a smiley-emoji here, but those don’t work on my blog for some reason.
In any event, have a safe and happy long weekend, and I’ll be back with a new post on Tuesday!