It doesn’t matter whether you’re a seller, a buyer, or an agent – learning a transitioning market isn’t easy.
Now to be fair, a lot of the people who fail to learn do so out of ignorance, or refusal. It’s not easy for a seller to accept that they would have sold their house for a higher price in February, and still pull the trigger in June.
But as the spring market looks to summer, I don’t know who looks more foolish: the stubborn seller, or the ignorant one.
Change is something a lot of people are inherently bad it.
Personally, I’ve never been good with change.
Big or small, I hate change, in every way imaginable.
I remember being 11-years-old when my father came home and told us that he had bought a new home, which was much bigger, and in a better area. I cried uncontrollably for three hours, and was anxious every day for weeks. When the “FOR SALE” sign went up on our lawn, I got a hammer out of the garage, knocked it off its post, and hit it around the side of the house.
We moved eventually, and the house was incredible, as was the area, and the street. But in that moment – being told a massive change was coming, I was completely unwilling to accept it.
Big or small, I hate change.
I’m writing this from my dining room table, where I write most of my blogs. I’ve sat in the same chair for six years, and my wife just moved the table against the wall so we can have more room for our 7-month-old daughter to play, and I’m losing my mind. I feel lost on the other side of the table, in a different chair.
Anyways, that’s all besides the point.
Not all change happens immediately, overnight, or on the spot.
Some changes take time, and happen slowly, and that period is called a “transition.”
I’m not sure which change is tougher to accept: the one that happens right away, or the one that takes place slowly.
Perhaps with the former, you have more time to act in denial.
The Toronto real estate market has changed, and is changing as we speak.
Houses are still selling, prices are still up 15% on the year, and the market is still a seller’s market.
But we’re a long way from what transpired in January and February of this year.
As I’ve written on TRB over the past two months, and showcased in some of my Pick5 videos, single-family homes are no longer selling for 161% of the list price, nor are they getting 10-15 offers, each and every time the sign goes up on the lawn.
And remember when crummy CityPlace condos, listed at $379,900, were getting six offers? That was an interesting time…
I’ve posted a few blogs on the “listing and re-listing,” as I call it, when houses come out at a low number, hold back offers, don’t sell, and are then subsequently re-listed higher days later. But now I want to give you an example, just to show you exactly what’s going on in this transitionary market, and just how ignorant or careless some sellers are being.
But first, consider the following:
1) The price a house is worth.
2) The price a seller wants for the house.
3) The price the market will bear for the house.
Once upon a time, #1 and #3 were the same.
“A house is worth what somebody is willing to pay for it,” the infamous real estate adage goes.
Whether the market is hot or cold, we can argue that a house is truly only worth, or worth as much as, a buyer is willing to pay.
Today, that might not be relevant, as I’ll explain when we talk about houses that are actually under-listed, but don’t get any offers on “offer night.”
As for #2, that’s also an interesting intersection of today’s market, since, for a long time, the sellers had absolutely no idea of what price they wanted for their homes.
When the market was at the peak of insanity, I was having trouble getting sellers to believe me when I told them how much I thought we could get for their properties, or even on offer night, when I called and said, “Our highest offer is for $681,0000,” the seller, who thought his property was worth $500,000 three months earlier, would say, “This is a joke, right?”
So whereas in a hotter market, #1 and #3 were more than #2, it seems today, the opposite is true.
Many sellers want and/or need to sell, and will do so in current market conditions. They’re not looking forward, not looking ahead, but rather working in the current market.
Then some sellers are stuck in yesteryear, refusing to acknowledge that prices are actually down from earlier in the year.
I’ve never seen this level of willful ignorance, nor have I seen this level of greed. The entitlement bears mention as well, as many sellers feel that having owned a house in March, entitles them to March’s price, today.
I told you the story a couple of weeks ago about a house on which I bid in Leslieville, listed at $799,900, for which my clients offered $900,000. That house was re-listed for $1,050,000.
But that’s nothing compared to what I saw last week.
Another house, which we’ll just say is in the city, was listed for $899,900.
I had clients looking in this area, who are merely starting their search, and I told them, “There’s a house that’s up for sale, taking offers tomorrow night, that will not sell, and will be re-listed higher. I think we should go have a look, just as an exercise.”
Disect what I just said, and it seems odd.
The house is for sale, but I know it’s not going to sell on offer night, and is going to be re-listed higher?
Well, three reasons:
1) The sellers likely want far more than the current market will bear.
2) The listing agent is playing a game that nobody wants to play.
3) The buyer pool want to know what the house is actually worth.
And that’s another distinction we need to make here.
Part of the reason why all these houses are being listed and then re-listed, after they don’t sell on offer-night, is because the buyers know there’s a built-in “Plan B” to re-list.
It’s at that point, that the seller has to essentially take off the disguise, and tell the market what price they really want for the home.
So with respect to this house I was showing last week, I told my buyers, “This house is worth more than $899,900, no question. It’s a semi-detached, 3-bed, 3-bath, with parking, fully renovated; it’s a million-dollar house for sure.”
My clients’ budget is somewhere in the $900’s. As with most buyers, they probably want to land under $950,000, but they can go to $1M if need be.
I wanted to show them this house, not only to introduce them to the area, and show them a particular style of home I thought they might like, but also, as I said, as an exercise in what’s going on in today’s market.
It’s one thing to have money, and another thing to be an active buyer, but navigating this transitioning market is not something every buyer is ready for.
We went and took a look at the house, and it was a very nice renovation, but extremely poorly presented.
I know I’m going against some of my own advice here, when I tell buyers to “look past” certain things, but it’s tough to do when your first impression is the old sh!tter sitting on the front lawn:
A million-dollar-house, you say?
It sure didn’t present like one.
There were so many careless and lazy elements of this listing.
Little things – like leaving fluorescent light bulbs in the garden:
It’s just really careless.
But why amateur-flippers finish 98% of the job and then list in a hot market, is a topic for another day, and one we’ve covered many times.
Suffice it to say, there were urine stains on the marble tile in the bathroom, the sellers were too lazy to peel off all the stickers on the new Pella windows, and it was quite evident that the listing agent couldn’t be bothered to drive 45-minutes into the city to check up on his/her listing, as nothing had been updated, cleaned, or rearranged after a slew of agents and buyers had trekked through.
In any event, the intrinsic value of this house was at least $1,000,000.
And yet I showed this house to my clients, when it was listed at $899,900, at 7pm on the very night of offers, and by the time they showed up at 7pm, I had just spoken to somebody at the listing brokerage who told me there were zero registered offers.
I told my clients, “We’ll keep an eye on this one, and see what they re-list for,” the same thing I had told them the day before, in anticipation of this very result playing out.
I figured they would re-list around $1,049,000, or $1,079,000, but I held out hope that they really needed to sell, the house would be re-listed for $999,000, and my clients might have a shot within their budget.
The next day, I couldn’t find it in “My Favourites” on MLS.
I thought it had disappeared.
But evidently, I just never thought to scroll down – way down, down there: towards the properties priced around……………..wait for it……………$1,330,000.
The increase in price on this home was nearly 50%.
And what astonished me more than the new $1,330,000 list price was the fact that, at some point, the seller and/or the listing agent thought that somebody would pay 150% of the list price for this home.
Why not just list the house for $1?
And now, the property will sit, likely for weeks, possibly for months, as the sellers lament the cruel market that surrounds them.
In reality, they never should have under-listed at $899,900 in the first place, but rather should have listed for a price that reflects #2 on our list above: the price that they want for the home.
Because I believe that the new $1,330,000 list price reflects a built-in “negotiating cushion” that they, for some reason, felt they needed.
Sellers in today’s market need to realize that they can no longer expect to under-list their properties for a price that often seems to be selected at random, have a windfall of offers on their pre-selected date, and then sell for a price that was nowhere near their expectations – because they never had any expectations to begin with.
Many buyers are now waiting to see what the re-list prices are, before they consider making offers on houses.
Welcome to the Summer, 2017 market, folks.
We’re in a transition, and so many sellers just refuse to accept market conditions for what they are…