Wanna Play A Pricing Game?

No matter how hard you try, and how much you want it to be, you simply cannot turn an apple into an orange.

Tell people it’s an orange, place the apple in the orange section, hell – even paint it orange!

It’s just never going to be an orange.

Call me a sadist, but I love watching sellers and listing agents list, re-list, and re-list again, trying desperately, and unsuccessfully, to fool the market.

Boy do I have a doozie for you…

PriceGame

Last weekend, I was driving through my neighbourhood with my wife, and I saw an open house sign on King Street.

The unit number advertised sounded familiar to me, and suddenly I remembered, “I listed that unit seven years ago.”

I told my wife, “I had an awful time selling that place.”

Strangely, my wife knows every one of my clients by name, and could probably recall a random condo-buyer from five years ago if she were challenged.  Who ever said my work doesn’t dominate the relationship?

But this particular condo was from before we met, and so she asked, “What was so tough about it?”

Well, where to start?

It was 2010, and the condo market wasn’t as strong as it is now.  The unit looked out at a brick wall that was about 15-feet away, from every room except the master.  But the master didn’t have an ensuite bathroom; the smaller, adjacent bedroom, with the smaller closet, did, and thus a buyer would be forced to make the inferior bedroom the master.

I listed this condo twice back in 2010, and it sat on the market for a whopping two months, which today seems like an eternity, but back then, for a condo like this, wasn’t all that bad.

I finally sold the condo, and got out from under a tough listing.

And wouldn’t you know it – the owner one level up, with the identical unit, hired me to sell his condo one month later.

That was then, and this is now.

Today, the market is more efficient, and although a condo facing a brick wall wouldn’t be an easy sale, I have to think the market conditions we’re in might make it a little bit easier.

I’m not a fan of listing, re-listing, and listing once again.

I’m not a fan of changing “strategies” with regards to pricing, and holding back offers, because I believe that the buyer pool, and buyer agents, are not stupid enough to see an $899,000 house sit on the market, and then get excited and line up to bid just because it’s re-listed at $699,900 with an “offer date.”

I think you either list low, hold back offers, and do everything you can to get the highest price, or you find fair market value, and over-list, and do everything you can to bully the first or second buyer agent through the property into making a full-priced offer.

Not everybody sees it the same way as me.

And not everybody believes, like I do, that price stigma exists in our market.

The buyer pool in Toronto has never been savvier, and has also never been more informed.  As a result, I think it’s getting harder and harder to “fool” the buyer pool into believing an apple is an orange, and as properties continue to languish on the market, and go back-and-forth on price, the buyer pool gets turned off.

I often play this game with my daughter where I hold out something of interest, and when she reaches for it, I pull it away and say, “Nooooo….you can’t have this!”  Then she smiles, I smile, and I offer it again.  She reaches out again, I pull it away, and we both laugh.

She seems to love this game, even though it kinda seems like I’m teasing her!  Well, kids are kids, I suppose.

As you can imagine, she’s only going to want to play this game for three or four rounds before she eventually grows tired of it, and turns her focus elsewhere.  Or, she just screams, and I give her the proverbial shiny object.

I can’t help but feel the result is the same in the Toronto real estate market where you continue to tease buyers with “bait-prices,” only to re-list higher when your “strategy” doesn’t work, then re-list lower, and so on.  Eventually, the buyer pool grows tired of the game, and moves on.

I was perusing the “New Listings” one day last week, and I saw a property that I had seen before, a couple of times, in fact.

We’ll call it “123 Smith Street” just to preserve its anonymity.

I thought aloud, “When did I first see this place?”

I tried to remember with whom I had discussed the house, and then I mapped it, realized it was the last house on a crappy street, with the Go Train tracks literally 30 feet away, and remembered the buyer-clients who had asked me about it.

But the funny thing is, those buyer-clients bought in the summer.

In fact, I had discussed this property with them……….in June!

I ran the history of the property, and wow, what a sight!

Let me give you a quick lesson on how not to sell real estate in Toronto…

123 Smith Street was first listed for sale for $828,000 on June 13th, 2017.

The listing said, “Offer Will Be Greatly Reviewed At 7pm June 20th,” and no, that’s not a typo, it’s just grammatically incorrect.

Believe it or not, the same property was listed for sale on June 14th, 2017.

That’s right – for a period of two days, this property was listed on MLS twice.

Quite the start, they were off to, wouldn’t you say?

The first listing was terminated on June 16th, and the duplicate listing remained on MLS.

The June 20th offer day came and went, and while I don’t know if and/or how many offers they received, I would bet my reputation the answer was “zero.”

This listing was a classic candidate for the old, “list-low, hold back offers, don’t get any offers, then re-list higher” strategy (if you call that a strategy…), but on June 21st, the day after “offer night,” the listing remained on MLS, and the property was still priced at $828,000.

On June 22nd, the property was still available for $828,000.

And on June 23rd, and on June 24th.

Call me old-fashioned, but I do believe that we Realtors can be guilty of “false advertising,” in cases where a property is listed for sale, without any scheduled offer date to indicate the listing price is the ‘starting price’ in an pseudo-auction, but the seller has no intention of accepting that price.

It’s a grey area, and one I’ve never liked.  But you can’t list a property for sale for $999,000, say “offers glady reviewed any time,” and then turn down $1,000,000, and expect to keep the listing on MLS at $999,000.  That’s blatant false advertising.

In any event, I think you know where I’m going with this.

The property remained on MLS at $828,000 for nine days, even though the seller had no intention of accepting that price.

And on June 29th, that listing was terminated, and the property was re-listed for $975,000.

It’s just bizarre.

And we’re not even halfway through this story.

Two weeks later, the property was reduced from $975,000 to $926,600.

And my favourite part: in the broker’s notes of the listing, it said, “Property Reduced For Quick Sale.”

How quick?

Like, you’re-still-on-the-market-in-December-quick?

On July 20th, that listing, at $926,600 was terminated.

The sellers then took some time away from the listing, which is the only right move they made in all of this.

They didn’t re-list until September, and by then, they had moved on to a new agent.

Clearly the agent’s fault, right?  A house worth $800,000 on a good day, was listed at $828,000, with illusions of grandeur about obtaining close to $1 Million, in a declining June-July market.  That usually has more to do with the seller and their expectations, although to be fair, a listing agent who won’t stand up for what he believes in, and tell the seller the hard truth, is to blame in cases like these.

In any event, the “new” listing came out for $865,000 on September 14th.  Oh – and it also came out for lease at $3,700 per month.

The MLS listing started out with, “Priced To Sell!” which is usually what people write when the property is not priced to sell.  If the property were priced to sell, the market would respond in kind, and you wouldn’t need to write, “Priced To Sell.”

So this property, which was apparently priced to sell, sat on the market for 49 days.

There was something so ironic about this to me, considering the listing agent never thought about removing the “Priced To Sell” tag, after the second week of not selling, the third week of not selling, the fourth week of selling, and so on.

On November 2nd, the listing was terminated, and the property was re-listed anew for $849,000 (and of course, for lease at $3,200 per month).

One again, the “Priced To Sell” bit was prominently featured at the start of the listing.

The “new” listing at the “new” price seems quite silly to me.

Did the sellers think that all the buyers who couldn’t afford $865,000, and didn’t look at the house, would now see the house as an affordable option at $849,000?

It’s sixteen-grand.  It’s a rounding error.  They’d have been better off to keep it at $865,000.

This listing lasted for 27 days, remaining at $849,000 with no reduction, until it was terminated on November 29th.

So let’s recap:

-2 different agents
-6 different listings
-5 different prices
-5 months from the first listing

And here comes the best part, folks.

If you don’t know where this story is going, then you haven’t been following closely enough.

Having last been listed at $849,000, almost six months after first hitting the market, the seller and the listing agent have a new “strategy” in play.

Ready?

List at $799,900, and hold-back offers.

BOOM!

“Offers Reviewed On Monday, December 4th, 2017.  Pre-Emptive Offers Welcome.”

Really?  You’ll take a pre-emptive offer?

Oh please, oh please, consider my offer at $905,000.  I don’t want to have to line up and “bid” on offer night against all those other buyers.  Please accept my pre-emptive offer today!

Folks, how in the hell does anyone with half a brain think this is going to work?

It was listed at $849,000 for a month.  We know the sellers will take $849,000, or less.

So what the hell makes the sellers think that the buyer pool out there will see a $799,000 list price, with a “hold-back” on offers, and show up on “offer night” with a deposit cheque in hand, ready to bid over the list-price against competition?

It just doesn’t add up, to me.

Is this the best idea the listing agent and the seller have?

And what buyer in their right mind would get involved in this?

If you want the house for $799,000 (which you probably don’t…), then fax an offer for $799,000, with no cheque, on offer night.  But don’t spend more than nine minutes on this, because you’re dealing with a couple of wild cards here.

I think if the seller really wanted to create a “frenzy” with the listing, that might trick the buyer pool, they should have listed at $699,000.  Don’t get me wrong – I hate the strategy, and I would never do that myself, but if you’re in for a penny, then why not a pound?

So what do you think, folks?

What’s the likely outcome here:

a) The house sells in competition, over $800,000
b) The house sells for $799,000, as the seller finally comes to his senses
c) The house is re-listed on Tuesday for something in the $800’s
d) The house remains on the market at $799,000, and we won’t know if the seller will actually entertain that number

I welcome your thoughts below.

And I’ll be sure to update this post on Tuesday…

24 Comments

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  1. Lui says:

    Blame the owner of the house hiring bad agents.If they were serious about selling they would have priced it properly.Agents in fairness trying to max out their commissions.

  2. steve says:

    Well, I suspect there will be more listing adventures now that inventory is beginning to swell and buyers are becoming cautious. If the sale history becomes public things will get even more interesting. Transparent sale histories, prohibitive lending regulations, and higher interest rates are all coming to town … difficult times coming up for sellers.

    1. Professional Shanker says:

      Already are public – check out MongoHouse & House Sigma

  3. paul says:

    it will sell in the very low 800’s

  4. Ralph Cramdown says:

    On November 3, I predicted this here:
    “My predictions for 416 detached, November: 675 sales. $1,236,000 average price, $960,000 median price.”

    TREB announced 812 sales, $1,276,184 average price, $949,500 median price.

    Lots more sales than my simple model predicted, but the prices were close. It looks like fall prices peaked in late September and early October, but sales have continued to climb. I wouldn’t say bears are running for the exits, but jogging might characterize it. Lots of buyers in November, especially in the second half, but not enough to keep prices from continuing their gradual descent, partially seasonal, I’m sure.

    It is unfortunate for TREB that a house which recently sold in my neighbourhood was an exclusive. Never on MLS and no lawn sign, until one day last week a “sold” sign sprouted, fully formed. I’m guessing about $4. Would’ve helped the board’s numbers, that’s for sure.

    1. Kramer says:

      Looking forward to the official David post on this.

      Near-term (and maybe even medium-term now) – I’m spooked. Starting to feel like “they” threw too much water on the fire.

      But I’m having trouble working in the fact that condo sales/prices still so hot… I get why… but in terms of the spread between condos and the more expensive categories… how much can it narrow, and if it narrows too much, what is going to give?

      If the new rules push so much action into condos, does that result in more condo-sellers with equity pushing into semis… and more-semi sellers with equity pushing into detached? Or does everything just deflate?

      1. Chris says:

        “Near-term (and maybe even medium-term now) – I’m spooked”

        There’s that sentiment-factor I brought up a few weeks ago. Does it still seem so crazy?

      2. Professional Shanker says:

        I believe the answer to your question is somewhat rooted into whether a large proportion of the condo sellers are speculators (multiple property individuals) which has been rampant over the past decade and more significant than in the town and SFH segments. In this case condo sales would not propel move up buyers and a continuing tightening spread may indicate this action. The diverging trend is quite interesting – I wonder what David’s prediction is for condo price growth throughput 2018……beats me.

  5. Joel says:

    Sadly, I think it will sell for over $800,000 tomorrow.

  6. Craijiji says:

    For those that want to check it out, the address rhymes with 163 Salt Ave.

    I went to see it in person, let’s just say that there are a few reasons why it’s still sitting there.

    1. Kyle says:

      Is that an original imac in that nasty room with the mirror mastic all over the walls?

      1. Ralph Cramdown says:

        Mastic! Solves one mystery, for me.

        But opens up a whole lotta others. Basement rooms with mirrors (or something) on the walls AND ceilings, fairly high intensity track lighting, windows/mirrors between rooms, odd HVAC and crude holes (cable runs?), and ceiling mounted curtain rods?

        Is this a cam girl setup?* Or a live version thereof (I think they used to be called ‘peep shows’)? And per what Craijiji points out, you can clearly see if you’re looking that the 2nd floor has several exterior doors leading to nowhere (a.k.a. a 12′ drop), thus the baby gates on the inside.

        Maybe best post ever, from an intrigue POV. Hope it doesn’t get wiped, and that other posters solve some of the mysteries. I’m guessing that the listing agent put up these pics so unsuspecting (but not completely clueless) buyers wouldn’t have their sensibilities shocked upon viewing?

        * – No, dear readers, I don’t spend my time looking at skin on the net (if so, I wouldn’t be here, duh!) But I am widely enough read that these pics suggest cams to me, and little else. Help me understand.

        1. Craijiji says:

          That room with the ancient relic that was once an iMac, and the mirror mastic is the “studio” out back.

          1. Ralph Cramdown says:

            Thanks. I was trying to reconcile the two rooms, and the obvious was a recording studio/radio type setup but, try as I might, I couldn’t get the (mastic and ceiling curtain track of #1) viewed through the interior window of #2 to match up in my head, so I started to think it was more than 2 rooms. Having someone who’s seen it and said “it’s only the two” really helps.

        2. Sarah says:

          SUPER Creepy….
          David’s photos on “hot house of the week” back in June looks like an inviting space. HOWEVER those ‘studios’ give me the Heebie-jeebies just looking at them. Not good energy/vibes coming from those photos. No wonder this still hasn’t sold

    2. Libertarian says:

      David had it as is Hot House of the Week back in June

      http://torontorealtyblog.com/archives/18351

      Except it didn’t have the photos that Kyle refers to. Those two photos sure do stick out like a sore thumb. What is up with that???

      1. Craijiji says:

        The house is empty now too, and I found it very odd that every room has a sliding patio door that leads to no where.

  7. Kramer says:

    I’m all for trying different strategies… but that all just sounds ridiculous and makes the seller-side look disorganized and not someone I would want to do business with.

    We were talking about how street names can turn a buyer off… so can wild sellers I think… kinda makes the property feel dirty, like a couple of shysters were living there before you, infecting it with shyst.

    1. Ralph Cramdown says:

      A few details were left out. It’s a fix-and-flop, bought within weeks of the peak. And maybe we’ll see some of the listing photos on one of David’s MLS Fridays. Ayn Rand’s hero protagonist (hint, hint) probably wouldn’t be proud. But maybe instead of fixing the place up, owner should’ve done what Rand’s OTHER protagonist did, and dynamited the place.

      1. Craijiji says:

        A few of the kitchen tiles were complete devoid of surrounding grout. The kitchen counters and all bathroom counters are all the same, that goes for the floors too. Overall, the “fix” seemed rushed.

  8. Libertarian says:

    I think the house sells for over $800,000. Maybe not tonight, but eventually. It’s December – there will be some buyer agent out there who won’t research the history of this house and wants a commission in time for xmas. That buyer agent will tell his/her client to put in a bully offer to secure the property because the new rules are kicking on Jan. 1, so they better buy it now….or else…..

    1. Ralph Cramdown says:

      Yeah, “quick closing available” is the new “awaits your personal touch” in MLS comments.

  9. Marina says:

    It’s tough to internalize that you left money on the table. We are not selling, and I still find it unsettling that today we can get for our house a couple of hundred thousand less than we would have in April. So I sort of understand why sellers have a hard time with reality.
    That said, if you are not prepared to sell at a realistic price, then don’t sell right now. And if you have to sell for whatever reason, then buck up, face the music, and if necessary self-medicate with Malbec. Unrealistic pricing does no good to anyone.

  10. Ralph Cramdown says:

    “The buyer pool in Toronto has never been savvier, and has also never been more informed.”

    Isn’t this also true about the seller pool, and about the agent pool? And about stock market investors, government policy wonks, Twitter contributors, Bitcoin investors and used car buyers?

    Fear and greed, supply and demand.

    It sounds like this place would have sold in a bidding war for $950k in April, maybe more. Put yourself in the seller’s shoes. You’re ready to list in June, but the last train from Palookaville left two months ago and since then it’s been crickets. Wait until September, or list right away? Will the market come back in the fall, or should I take this lowball offer in August? I know that the realtor mantra is usually to price competitively for a quick sale, and to keep dropping the price on a fairly aggressive schedule until it sells. But that’s where there’s a conflict between the realtor’s goal (a quick commission) versus that of some sellers (the best price), ESPECIALLY if you were the poor schmuck trying to unload railroad-oriented Toronto SFH this summer…

TWEETS