I’m about to open a can of worms here, but this can needs to be opened.
Then it needs to be examined by all the real estate bodies in existence, and active buyer-agents should have a look inside too in order to prepare themselves for what’s going on out there right now.
We all know that properties in Toronto are usually under-listed at a price that the seller won’t actually accept, with an unofficial auction we call “offer night.”
But what if there was no offer night? What if the property was listed at a price that the seller would never, ever, consider accepting?
For as long as I’ve been in the real estate business, properties have been listed and sold with “offer nights.”
It seems like a completely reasonable way to sell real estate in a hot market.
List a property for sale, and review offers on a given day, at a given time.
It ensures the property is exposed to the market for a long enough period of time that all the interested parties are able to view it.
Whether you’re a frustrated buyer, a real estate bear, or just have a hate-on for real estate and real estate agents, you simply can’t deny that exposing the property to the market for 6-8 days makes sense.
Now, throw the “under-listing” into the equation, and you have a legitimate beef.
The public doesn’t like it, and I don’t blame them.
But for as long as I’ve been in this business, properties have been under-listed, and along with the set “offer night,” we’ve had a form of blind auction that results in houses selling for way more than the asking price.
The spread between the list price and the sale price has grown in recent years.
I remember the first time I was in multiple offers – it was September of 2004.
A bungalow in Leaside was listed at $429,900, there were 12 offers, we bid $465,000, and the house sold for $480,000.
Imagine if there were 12 offers on any $429,900 listing today? $480,000 would probably be in the middle of the pack.
But I also remember being in multiple offers for a house listed at $459,900, and we were the high bidder at $470,000, with two competing offers.
As the years went by, prices rose, but so too did the number of offers, and the spread between list-and-sale.
And somewhere along the way, list prices became completely detached from reality.
We used to see houses sell for $100,000 over asking, and then in the spring of 2015, that number doubled. I remember a quote I gave to Sue Pigg from the Toronto Star around that time: “Two-hundred-thousand-over is the new one-hundred-thousand-over.”
It was just nuts.
Houses listed at $600,000 were selling for $800,000! We had never seen anything like it!
But the absolute pinnacle of insanity hit in early 2017, when houses were being just stupidly under-listed, and the sale-to-list ratios were eye-popping. It wasn’t uncommon to see a house listed at $699,900, and sell for $1,100,000. 170% of list price – that became a “thing.”
The problem, of course, was that listing agents were under-listing to the point of hysteria. Maybe because nobody knew what anything was worth, and maybe because listing low really did bring in more dummy offers from, well, dummies.
As much as I hate the under-listing, I will say this: nobody really thinks that $699,900 house is going to sell for $699,900.
Why? Because we know via the presence of the text, “Offers Reviewed On Tuesday, May 30th At 7:00pm, Please Register By 5:00pm,” that the property is being auctioned off, and the list price is merely a starting price.
Like I said – hate it if you want, but that’s the way it is, and only the completely uninformed and naive would be caught off guard by this.
Now as I said in the intro, what if a property was listed for sale – under-listed, with no offer date, advertising “offers anytime,” and continued to sit on the market? What would that signal to buyers and other market participants?
Last week, I went to show a property listed for sale in the west end for $978,800.
The property had been listed for sale for 12 days, which is an eternity in this market.
In the Broker’s Remarks of the listing, it read, “Offers Anytime.”
Pretty, simple, right?
In this really strange market right now, we’re seeing a lot of properties listed with a hold-back on offers, and subsequent “offer night,” and then not selling, and being re-listed higher.
But we’re also seeing properties listed with “offers anytime.”
I went to see this property with my client, and we absolutely loved it.
It was detached, fully renovated, and done so very tastefully, and with great workmanship.
There was no parking space, and it was directly across from a school, and only about eight houses in from a main street, but there had to be some drawbacks, considering it was under $1,000,000.
We acted on it quickly – we submitted an offer for just under the $978,800 list price (why not try for a couple thousand, we thought?), and eagerly waited for an answer.
The agent sent me a text message and let me know that there was an offer in sign-back; from the seller to the buyer. Thus we had no option but to wait, cross our fingers, and hope that the buyer didn’t accept the seller’s sign back.
As luck would have it, that’s exactly what happened.
The agent texted me (remember when people used to phone each other?) and let me know that the door was open for us to act.
I gave him a call just to feel him out and told him that we had no issue paying the full list price, or even higher, if the other offer was still in play.
That’s when things got weird.
His response contained a bit of a chuckle, as he said, “Huhyeah, um, well, that isn’t going to do it.”
“What isn’t going to do it?” I asked. You’re at $979K, on the market for almost two weeks, and we’d to go a mill. What am I missing here?” I asked.
“Do you know what market you’re working in?” he asked. That’s something I usually say to people, not the other way around.
“What am I missing? Tell me, please.” I told him.
And that’s when he dropped this bomb on me: “We’re looking for $1.3 Million for this house.”
What the $*%&?
What was I missing?
This house was on the market for 12 days, no offer date, offers any time.
Is there something new in the market that I’m missing? A new way of selling houses?
Maybe, as I was about to learn…
“I don’t understand,” I told the listing agent. “You’re sitting on the market – you have no offer date, right?”
“No, there’s no offer date,” he told me, “We’re ready to look at offers any time.”
“Then what the hell is with the price?” I asked him.
“Everybody does it,” he told me. “That’s just our starter price,” he explained.
This made absolutely no sense to me. I’ve been working in this market for thirteen years, and I’ve seen everything there is to see. But this was something new, and different, and it made zero sense.
“We need to expose the property to the market as best as we can,” the listing agent told me. “We need bodies through that house; we need eyes on it. We need business cards on the counter, and we need a buyer frenzy.”
“But you haven’t set an offer date,” I told him. “That’s what we do – bring the listing out at an artificially-low price, hold back offers, and have an unofficial auction.”
“That’s not what we’re doing here,” he told me. “We’re looking at offers anytime, but we know what we want, and we want $1.3M. The offer that was in play earlier – we signed that back at the price we wanted.”
I thought long and hard about what I was about to say next, since I’m not a fan of burning bridges, but I couldn’t resist.
“How in the world are you not guilty of false advertising?” I asked him. “You’re listed $300,000 lower than what you’ll accept, and this isn’t a ‘list low, hold an offer night’ strategy. I have no idea what you’re doing. What do the sellers think?”
That’s when things got more interesting, as he told me, “Well, I guess at this point I should probably inform you that I have an interest in the property.”
Now is the time for that?
That’s supposed to be disclosed on MLS! There’s a form for that – “Form 161: Registrant’s Disclosure of Interest in Property.”
That’s supposed to be signed by the registrant (agent) and uploaded to the MLS listing.
And after further investigation, this guy didn’t “have an interest” in the property; I’m pretty sure he owned the whole thing. The name on title was an incorporation, of which he is the sole director.
In any event, his interest in the property wasn’t the issue here – it only exacerbated the situation, which I recapped by asking, “So you’re on the market for $978,800, but you’re looking for $1.3M, you have no offer night, and you’re not telling people that you’re looking for $1.3M, right? You’re just letting agents and buyers waste their time by going through the house, making an offer, and then you’ll sign their offer back for $1.3M, and tell them you own the property?”
Amazingly, he said, “Well if we listed at $1.3M, we wouldn’t get as many showings. We don’t want to scare people away.”
So instead, you’re just going to lie to them, waste their time, and in the end, make them look like fools.
I was a fool for making an offer on this property at the price I did.
But how the hell was I supposed to know otherwise?
This property has now been on the market for 16 days, unsold, with offers anytime.
It is listed for sale for $978,800.
But the property may not be purchased for any price remotely close to that number.
Ladies and gentlemen, how the HELL is this not false advertising?
That question is rhetorical, since it’s blatant false advertising.
But given that this is going on, and broker-managers are letting their agents do it, maybe the question isn’t rhetorical. Maybe organized real estate is okay with this?
In my mind, it’s false advertising, plain and simple.
If you have an offer date set, you’re telling the market that you expect multiple offers, and essentially admitting that you’re under-listed as a means to an end.
I get that. And so does the buyer pool, even if they don’t like it.
But are we really going to start listing properties for sale for prices that we have no intention of accepting, and simply trying to “trick” people into coming to see it?
Maybe this was a one-off.
I hope to God this was a one-off.
But as is often the case in real estate, when agents see something like this, instead of condemning it and filing a complaint, they wonder, “Can this work for my listing too?”
I’ll be sure to update this post when the property sells. I’m keeping a sharp eye on this one…