Urband legend? Or reality?
Oh – it’s reality! This actually happened earlier this week as a stupidly-underpriced house received thirty-three offers and likely left a lot of buyers feeling really silly once it sold for far more than they had ever considered offering…
Patrick Roy wore #33 for the Montreal Canadiens and Colorado Avalanche for his entire 18-year career.
33 is the temperature at which water boils, according to the Newton scale.
“Thirty-three” is a song by the Smashing Pumpkins, although not a particularly good one.
Jesus Christ was 33 years old when he died…
But as of today, the number “33” will forever have a new meaning in my mind.
I’ve heard some amazing real estate stories over the past few years, but nothing quite like the house that received thirty-three offers the other night.
It was truly uncanny.
And, it was truly ridiculous.
Certain questions come to mind such as, “Why would you ever submit an offer with 32 competitors?” Or “How would you feel being the buyer that out-bid 32 other people?”
But before we address those questions, let’s analyze how and why this situation transpired in the first place.
If you listed a property for sale at $1.00, do you think you’d have significant interest?
Sure, you could draw in 33 offers. Or you might scare people away because the price is so utterly ridiculous.
If you listed a $400,000 property at $299,000, do you think you’d have significant interest? I think that you would, but a lot of that interest would be misguided.
Many buyers and many agents don’t do their homework, and if you saw a property that was “worth” around $400,000, listed for $299,000, I would hope that you could immediately identify the situation for what it is.
Unfortunately, some buyers don’t. There are buyers out there that might actually think they have a shot at getting this property for $299,000, or even worse – $290,000.
A house in the west end, for which I cannot provide the address as the deal has not closed, was listed last week for $499,000. There was an offer date of Tuesday, January 25th.
This house was not worth anywhere close to $499,000, but somebody thought that it might be a good idea to list it there.
Personally, I don’t subscribe to these tactics. I’m many things, and I have many faults, but I’m certainly not without integrity.
If I had a client ask me to list their house for $1.00, I might consider doing it. But if I had a client with a $625,000 – $650,000 house ask me to list it for $499,000, I wouldn’t do it.
As I explained to the (soon to be) greedy sellers of a neighbouring property last week as I presented my offer up against nine others, we are playing with peoples lives and their emotions. Purchasing a home is one of the largest and most stressful decisions anybody will ever make, and yet many sellers and agents alike will run the offer process without a single ounce of compassion.
Receiving fourteen offers on your condo and sending ALL fourteen offers back to “improve” is without compassion. As an agent or a seller, you know very well that 10-12 of those offers have no shot, but instead of letting the agents go home to their families and letting the potential buyers down softly, you send them all off on frivolous journeys that do nothing but waste time and toy with emotions.
But I digress…..perhaps for another blog post…
The house that was listed for $499,000 was situated on an incredible 50 x 110 foot lot, and had been completely renovated. It was a bungalow, so while you might assume that developers would be interested in purchasing the land and sub-dividing the property to build two houses, I think the house was “done” enough that the end-users would be able to pay more than the builders.
The house was a 3-bedroom, 4-bathroom property with two bedrooms in the basement – every inch of the house showing to its maximum potential. The bathrooms were renovated, and while the kitchen wasn’t quite 2011 standards, it surely couldn’t have been more than 5-6 years old.
The backyard was enormous and was fully landscaped with interlocking stone patio off the large back deck, and there was even a walk-out from the basement.
For what it was – this was a fantastic home.
But it wasn’t worth $499,000…
In June of 2010, a house sold just down the street for $478,000. But aside from the prices themselves, there was no comparison to be drawn.
For starters, this lot was 44 x 110 feet so not only were the house and property smaller, but there was no way that a developer could ever sub-divide the lot.
The house had 3-bedrooms, and 1-bathroom, so clearly it didn’t compare to the one that just sold this week.
But most importantly, this house was being sold in “As Is” condition since it needed substantial work. If I had to guess, I’d say that the owner/renovator/speculator/developer had started gutting this house and eventually ran out of money.
If this house sold for $478,000, in “as-is” condition, one year ago, on a 44, x 110 foot lot, with only one bathroom and in need of a complete renovation, then how the heck could this other house that is fully renovated on a 50 x 110 lot be listed at $499,000?
Because somebody decided to play games.
To turn House-A into House-B might cost you $100,000 – $150,000. But also consider the different lot size, and then add in an emotional premium for a buyer who is looking for that “perfect” house, or for somebody that puts a price on not having to live through a renovation, and you can see where House-B is worth well over $600,000.
The house sold for $678,000, with thirty-three offers.
So listing at $499,000 is absolutely ridiculous, right?
Well even though I don’t agree with the pricing strategy/tactic, I think we also have to lay blame with the buyers and their agents for not doing their homework.
If any of the thirty-three offers were under $600,000, then those buyers should give their heads a shake.
As I’ve been telling my clients lately, there are no “great deals” in this city of ours. We’re in a very hot market, and it’s been this way for almost a decade. I’m not going to say that prices are going “Up, Up, Up,” but I will say that our market is far to efficient for a “great deal” to fall through the cracks.
If shares of Apple are selling for $343 per share, can you really hold out hope that you’ll be able to find somebody willing to part with theirs for $310? The market is far too efficient to let that happen.
And while real estate isn’t as exact a science, it’s not that far off when you have every list/sale recorded and distributed for all to see.
I wonder how many of the thirty-three offers were less than $550,000? We know there had to be some, but how many?
And a better question is: “What were these people thinking?”
Did they think something like, “Well, we know that the awful, disgusting, gutted house down the street on a smaller lot sold for $478,000 a year ago, and we know that there’s likely a $150,000 difference in the two houses, soooooo………let’s offer $550,000”?
Is that rational?
Or is that a dream?
I guess the point I’m trying to make is this: If you were to list a house for $1.00, I think somewhere out there is a buyer who might be willing to offer $2.50 for it.
We were taught from a very early age that four-letter words are bad, and the word “wish” has no purpose in real estate.
I fear that many of the thirty-three offers were complete pipe-dreams, and the buyers thought “Well, there’s no harm in trying.”
But that’s where they’re wrong! Because there is harm in trying a $550,000 offer for a $650,000 house that sells for $678,000! Your offer had no business being submitted, and all it did was increase the eventual sale price and cause everybody else to waste a lot more time!
You can’t wish your way to victory in this real estate market, and while I disagree with the tactic of listing this property at $499,000, I also disagree with any and every buyer who submitted a useless offer that was either borne out of lack of knowledge and research, or a wish on a shooting star…