One Dollar!

This is the most ridiculous listing “strategy” I’ve seen in a long time, and as a buyer or a buyer’s agent – I would NEVER get involved.

These people have been playing pricing games for months, and when all else fails (and it has), they’ve listed the property at one dollar…

I’m growing increasingly weary of being accused of “Unauthorized Advertising” or breaking another TREB rule, so for the purpose of this post, I have to be exceptionally vague.

Let’s just say that the home in this story is located in………Canada.

I’m also going to change every number in the story, but I assure you that it won’t make a difference in the point.

This story is about a bunch of morons who likely came from different places, but somehow, some way, found eachother.

This story is a how-to guide for what NOT to do in real estate.

And finally, this story is a lesson for would-be buyers about when to walk away.

A house in “Canada” was sold earlier this year for $815,000, and closed on April 26th, 2011.

The house is located in a very good area, but is only the third house in from a very, very busy city street.

So a very funny thing happened, and I mean “funny” in the most un-ironic sense of the word: the buyers, who closed on the house on April 26th, put the house on back on the market on June 24th, 2011.  They priced the home at $944,900.

If this isn’t a classic flip, then I don’t know what is!

They owned this house for sixty days before attempting to resell it for $130,000 more.

They likely paid $24,800 in land transfer tax when they closed on the original purchase, and they’re looking at paying $47,000 in commission when the property sells.  All in all, they’re in for $886,800 or thereabouts, and they’re looking to sell for $944,900.

Personally, I don’t think that’s the kind of margin that’s worth going after, because let’s not forget that they had to do something to improve the value of the home!  Can we assume that they spent $50,000 renovating?  If so, then they’re barely breaking even.

I suspect that they did NOT spend $50,000, however.  In fact, I think they might have added a new kitchen, painted, and called it a day.

So they listed the house at $944,900 in June of 2011, and as is the fashion in this area and everywhere else, they held back offers.  Clearly, they were expecting a windfall, but offer day came and went and the house was not sold.

In fact, the day after “offer day,” they raised the price of the home from $944,900 to $996,900!

I’ve written full blog posts on this subject – raising the price after a failed multiple-offer attempt, and I don’t think it’s every produced the desired results.  But this case was even worse because it was a failed speculation attempt, and the sellers were way, way off on price!

The house remained on the market until August, when the listing was terminated, and then two days after the termination, they brought the house out at a new price: $995,800.

Wow!  It’s almost like a price reduction!  A thousand bucks!  That should bring in the foot-traffic!

So here you have a seller who, “apparently,” under-prices his home at $944,900, then raised the price $50K, and when the house doesn’t sell after 40 days, he brings the house back out at essentially the same price.

GENIUS!

But hold the phone – there’s more.

After only one week on the market at the “new” $995,800, the seller and the listing agent put their heads together (probably bumping in the dark), and come up with a brilliant idea.

The conversation probably went something like this:

Seller: “So we listed at $944,900 and didn’t get any offers.”

Realtor: “Right.”

Seller: “Then we raised the price, and for some reason, didn’t get any offers.”

Realtor: “Right.”

Seller: “So why don’t we……..”

Realtor: “List the property at one dollar?”

Seller: “Did we just become best friends?”

Realtor: “Yuh-huh.  Do you wanna go to the garage and do karate?”

The brain-trust reduced the price from $995,800 to $1 in what must be one of the largest price reductions of all time.   They set an offer date of Friday, August 26th, and added a caption on MLS that said, “Priced for action.  Bring your best offer!”

Really?

Priced at $1.00 is “priced for action?”

Well, literally, I would say that yes, it is in fact priced for action.  I think there are many people that would be interested in this property at the $1.00 price point.

But cynically, I’d ask the question: “What guarantees do we have that the seller won’t pull any more stunts?”

This is the issue in real estate – you only get one chance to sell your property for top dollar.  You can’t keep trying to re-invent the wheel, because every time you do, you’ll turn more buyers away and you’ll develop more of a stigma with the property.

Put yourself in the buyers’ shoes: do you really want to get involved with a seller who has demonstrated a pattern of listing and re-listing the same property?  Do you really want to put the work and emotional rigour only to have the seller turn around and say, “Great offer – but add $100,000”?

Some situations are just begging for disaster, and this is clearly one of them.

Let’s go through a handful of scenarios here:

1.  The seller gets ONE offer, and it’s for $850,000.  Of course he’s going to turn it down.

2.  The seller gets TWO offers, one for $912,000 and one for $915,000.  He’s not going to take either one, and he’s going to tell the buyers, “I’ll sell for $980,000.”  And if they don’t pay the price he wants, then he’ll put the property back on the market the next day at $995,000 again.

3.  The seller gets NINE offers, and the highest is $950,000.  Will he sell?  I still doubt it.

So why would any rational buyer want to get involved in this gimmick?  And that’s really all this is – a gimmick.  There’s something so off-putting about a property listed at one dollar.  It’s just a silly ploy that may or may not produce desired results.

Any rational buyer should understand that this seller is looking for $970,000 for this house, or thereabouts.

Whether the house is listed at $995,000 or $1, the seller is still looking for the same price.  He listed at $944,900 once before, but we know that he was never planning on accepting that price since he immediately re-listed the property after the failed “offer night” at $996,900.

We know he’s looking in and around that $970,000 price range, so the $1 price is absolutely meaningless.

As a buyer’s agent, I would advise my clients to stay as far away from this property as possible.  There is no “steal” to be had here.  We’ve watched the seller and the listing agent’s movements every step of the way, and this is just step six in the “Eight Steps To Becoming A Complete And Utter Moron” guide-book.

So what do I think will happen?  Tough to say.

If most agents think like me, then they’ll get zero offers.  And that is a distinct possibility.

Imagine how deflating that would be to list your house for $1.00 and get zero offers?

But don’t forget that if that situation were to arise, it’s not because a buyer isn’t willing to pay $1.00 for the property – because we all would, but rather because the buyer pool is refusing to pay $970,000 for the house – knowing full well that the seller won’t accept anything less.

Maybe they get an offer for $940,000 and the seller finally dumps the property.  It’s possible.

But I’m not holding my breath, and I wouldn’t be surprised to see this property come back out on the market next Monday at $989,000.

I always tell prospective sellers, “There’s a way to sell real estate, and then there’s everything else.”  I firmly believe in taking ONE shot at selling a property for top dollar, having done everything right, and in advance.  The longer you sit on the market and the more games you play, the worse off you’ll be in the long run.

The doubters have yet to prove me wrong, and I’m sure this $1.00 listing will be no different…

***UPDATE****

8/29/2011

Surprise of all surprises – this property did NOT sell and the listing was terminated.

11 Comments

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  1. ***UPDATE****

    Surprise of all surprises – this property did NOT sell and the listing was terminated.

    1. Graham says:

      Your favourite newspaper, the Toronto Star, had an article today about $1 listings:

      http://www.moneyville.ca/article/1051244–new-lakeside-oakville-home-listing-for-1

      They probably saw your post and decided they better do a story.

  2. Contrarian says:

    if you seriously see the possibility of few to no offers, I couldn’t think of a better opportunity to invest 15 min of your time to write up an offer. And if you seriously believe you are dealing with morons, all the more reason.

    Best not to let bitterness or pride blindside you.

    As the saying goes, a pessimist sees the difficulty in every opportunity…an optimist sees the opportunity in every difficulty.

    1. dave says:

      I’m not sure I understand your point. If they accept his offer he’d be stuck with a million dollar house he doesn’t need.

  3. McBloggert says:

    I don’t get this practice at all – often when searching for properties you put in your search criteria and if you’re looking for say a $800K plus house, chances are you filter out listings below $550K – so upon casual surfing you would miss a listing at $1!

    Ridiculous – I mean if you want an auction set it up with no reserve and let it go – and advertise it as such – “this house will sell on offer night to the highest bidder”. This just smacks of false advertising. I wouldn’t go near this with a 10 foot pole.

  4. Joren says:

    The next time TREB gives you grief, tell them that perhaps they should be spending more time giving grief to Realtors who operate as if every listing is their own home, showing up outside of confirmed times, NOT leaving business cards when requested to do so as part of the confirmation, letting their clients (or themselves) use the listings’ washroom and either not flushing, or otherwise NOT leaving it as they found it, rifling through drawers (!) sitting (at least I hope its just sitting) on other peoples beds, and generally showing a lack of respect for other peoples property. For sale or not, it is someone elses personal space and a hefty portion of Toronto “agents” show a complete lack of professionalism towards it.

    1. Chuck says:

      Almost every client I have these days is complaining about this. It’s getting worse every day. To the point where I have to warn people that something WILL happen that upsets you when your house is listed…

    2. the Lasch says:

      I showed up to do a showing a couple weeks ago, and there was a guy in rollerblades at the door, who told me he was an agent. He then proceeded to actually skate through the entire house. appalling.

  5. Joe Q. says:

    I did see a listing for $1 earlier in the week. Not sure if that’s “the one” you’re talking about, or if there are more than one currently listed.

  6. Joren says:

    I think I’d fax in an offer for .75

  7. Vincent says:

    I am seeing these $1 listings more and more. It’s so weird and I keep thinking it is a typo. But as usual, it’s just greed and stupidity.

    Please keep up posted on the final result; if it ever sells 🙂

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