Two identical units are listed for sale in the same complex, priced $20,000 apart.
The cheaper one is better, and they are both holding back on offers and reviewing them one day apart.
This situation is primed for one person to get screwed, and one person to get a great deal…
Raise your hand if you were ever a ten-year-old kid, watching The Price Is Right and shouting at the television “Gaaaaaawd….you’re so stupid!”
I think I gave up watching this show when I turned twelve because it was frustrating beyond belief to watch the scores of trashy people get up on stage and demonstrate how stupid they are.
Pictured above is “bidder’s row. You know how a bidder would say “One Dollar” when he thought that everybody else was bidding too high? What really frustrated me were the morons that didn’t understand, as they would look to their left and see that somebody had bid $800, and then gladly yell “Seven-ninety-nine, Bob.” Congratulations, genius. Now you can only win if that item happens to be the EXACT price you just bid…
Or how about the last person to bid – the bids so far are $800, $1000, and $950, and he bids $700! If you’re the last person to bid, and you’re gonna be the lowest – bid one dollar for God’s sake!
It got even worse once they were on stage. Unless the game happened to involve guessing the price of a pack of Twinkie’s, in which case they would always win that sought-after patio table and chairs…
The other day, I was showing two condos in Liberty Village “north” – the second phase of the townhouse complex that sits north of King Street and west of Sudbury/Dovercourt.
On paper, we saw that we were looking at two condos, each of the 2-bedroom-plus-den, 1-bathroom variety; priced at $319,900 and $339,900 respectively.
In practice, we were looking at the exact same unit!
When I say they were exactly the same, I mean they were the same floor plan from the builder and thus the same square footage, the same layout, and had almost identical finishes.
Walking through the second unit was like deja-vu. But the furniture was set up differently, and it made the first unit seem a little more versatile.
However, the second unit had much better lighting, and to say it made the first unit seem like a cave was an understatement!
Both of these units were “lower level” units, but not basements.
The grade of the land slopes downwards so while your front door is technically a lower level and you ascend about six stairs to get there, your back door leads out to an at-grade terrace, which is very private and features a well-landscaped walkway behind it.
So while the paint colors, lighting, furniture arrangement, and personal style of the two units is different, everything else is the same.
Everything, except for the terrace, which is the largest selling feature of the unit.
In the $319,900 unit, the terrace is about 240 square feet and the retaining wall is three feet high and made of red brick.
In the $339,900 unit, the terrace is about 160 square feet, and the retaining wall is six feet high and made of grey concrete.
And that is the difference between the two units.
Well, that, and the price.
In my opinion, the terrace is the entire appeal to this whole unit. Otherwise, it’s just another below-grade unit.
But in the second unit, the terrace feels like you’re sitting in a World War II bunker! It’s claustrophobic since the walls are so high, and it’s dark and somewhat dingy. There is a lot less natural light, and you can only see the landscaped walkway if you step on a stool, or happen to be six-foot-five…
There are other very small differences between the two units; for example, the first unit had upgraded kitchen flooring in the form of black slate while the second unit had cheap white ceramic. And then of course was the issue of lighting which I mentioned earlier, but that’s just because the owners of the first units are obviously vampires…
So let’s come back to the pricing, which seems to me to be completely out of whack.
The first unit should command a premium over the second unit; in my estimation about $15,000 to $25,000 based on the terrace which is larger and doesn’t feel like a filming location for Saving Private Ryan.
However, the first unit is priced at $319,900 and the second unit is priced at $339,900.
And they are BOTH holding back on offers.
So what should we expect to happen here?
While I do believe in an efficient market, there are a few properties that slip through the cracks now and then, as well as a few that sell for prices which they simply shouldn’t achieve.
If the second unit is “worth” the asking price of $339,900, then the first unit should receive multiple offers and sell for at least $15,000 more than the asking price of the second one, or about $355,000.
But will it?
That is my question. Will people just assume that the higher-priced unit is better?
Because I have a feeling that they will!
All that has happened here is one seller was unreasonable and priced his/her unit about $25,000 higher than it should have been.
The net result is massive confusion among buyers, and in my opinion, an opportunity for a steal.
The first unit, priced at $319,900, is reviewing offers three days before the second unit.
If the first unit sells for anything less than $339,900 – the price of the second unit, then it’s a steal.
If I were the buyer, I wouldn’t be interested in the second unit. That’s not to say that I wouldn’t buy it for $1, but it’s just not a viable purchase option for me as a primary residence based on the awful bunker-terrace.
So if I were to look at the first unit, I could make an offer knowing that if I end up in a multiple offer situation and get the property for anything less than $339,900, then I’m making out alright.
The second unit will sell, it’s not a matter of “if.” Everything is selling in today’s market, and it’s not like $339,900 is too expensive for an 830 square foot, 2-bedroom townhouse.
In theory, a property is worth “what somebody is willing to pay for it,” so in theory, if you paid $400,000 for a condo and the exact same condo, one floor lower sold the next day for $420,000, then you made $420,000 overnight. In theory, of course…
So with the two identical townhouses at Liberty Village, I predict that the first unit ($319,900) which has a better and more valuable terrace will sell for less or the same as the inferior unit ($339,900) simply because they take offers first.
It is. And while some confused buyers make stupid mistakes, others just hide in the dark and come out when everything is over to see what’s what.
That’s why I’m predicting a serious market inefficiency with these two units.
I’ll update this post next week when the two units are sold and we find out what happened…