The Friday Rant: Realtors WAKE UP!

A price INCREASE?  Really?  You’re INCREASING the price of your listing?

The root of the problem is with the sellers, but the blame can squarely be put on the professionals, ie. the Realtors themselves…

Buyers in today’s real estate market are so savvy.

In fact, I don’t think they’ve ever been this smart, and this well-informed.

On Thursday morning, I was set to go show four condos to a client in the west end, and he emailed me the following:

“They raised the price at 123 XX Street from $399K to $419K, can you believe it?  This is one for your blog!”

He’s right.  On both accounts…

I’ve been writing about this a lot lately – sellers who decide that they didn’t get “their price” on the first go-around, so they raise their price in search of fool’s gold.

It never works.  Trust me.  I mean, how could it?

And consider that my client emailed me with the information.  That is how well-informed buyers are in today’s market.  They know exactly what’s going on, and they refuse to be fooled.  They’ll turn their back on pricing shenanigans as quickly as I will, and I’m very quick!

On Thursday morning, I decided I was going to pick a fight.  I called the listing agent for this unit that I was about to go and show, and naturally, the call went directly to voicemail.  He called me back later, from his small “boutique” brokerage, and I simply said, “I’m trying to wrap my head around the price increase for the unit I’m about to go and show.”

He seemed to have his answer well-prepared.  “The current price better reflects fair market value for the property, as the previous price reflected a price that would solicit multiple offers.  Our seller is more comfortable with the current price.”

Right.  Well, I’d be more comfortable with one-hundred-trillion-dollars for my condo, but that’s not the point.

The point is that you had listed a condo at $399,000 that did NOT sell.  And for whatever reason, you decided that your new “strategy” would be to further alienate and push away potential buyers by increasing the price of the property.

Great thinking!

It’s like a bully who offers up some candy in his hand to a smaller child, and when the child reaches out, the bully pulls it back and says, “Na, Na, can’t have that!”

Most buyers simply say, “Ah, okay, well nevermind then – let’s just skip it.”

Is that the result you’re aiming for with a price increase?  Because if it’s not, then you’d better reconsider your actions.

We’ve seen this a lot lately in areas like Riverdale & Leslieville when houses are listed low to solicit multiple offers, have no success, and then the sellers re-list at a higher price.  But more frustrating is when they go high-low-high, ie. they list at $999,000 and don’t sell, so they reduce to $879,000 and hold back offers (which they don’t get), and then re-list again at $989,000.

Hey – it’s a free market, sellers can do whatever they want!  But do they really expect to sell their properties with this type of behaviour?

When it comes to condos, I think the logic is even more flawed.  When an agent says to me, “This property was priced for multiples,” I think that’s downright silly.  The condo market has cooled since the spring, I think we all know that, right?  I don’t think we’re on the edge of disaster, but I’ll admit that prices have levelled off, AND that inventory has increased and the climate has changed.

So how then do we “price a condo for multiples?”  What does this mean?

I’m of the mindset that NO condo can be priced for multiples, because the insane demand is no longer there.  I suppose if you priced a $400,000 condo at $299,000, then it would be “priced for multiples,” but I’m not convinced that strategy would work because buyers are too smart, and because buyers would ask themselves, “What’s the real price here?  They’re listed at $299K, but do they want?  What will they take?  And what will stop them from terminating the listing and coming out at $400,000 again?”

As a seller, you’re only accomplishing one thing: you’re turning buyers away.

But as a Realtor, you’re even more to blame, and this is where I might expose some of my colleagues…

There are 35,000 Realtors working in the GTA, and I think 15,000 could probably handle the load.

Many of these Realtors are truly “professionals” by definition, and many of them have no value whatsoever.

Many of these Realtors also forego the idea of “building a business” and rather they look for any deal, anywhere, in order to pay their rent next month.

I’m convinced that these are the Realtors who will take any listing, at any price, regardless of whether it makes sense, and they’re the ones that are primarily responsible for the pricing games.

A child does not tell a parent what to do, so why then does a crazy seller with illusions of grandeur tell a real estate professional how to list a house, then raise the price when it’s not selling?

If you’re a Realtor with little business and/or experience, and you have the opportunity to take a $500,000 condo and list it at $579,900 with a hold-back on offers, you probably take that listing.

But a professional would not.

I raised this point at my weekly office meeting on Monday.  I told my colleagues, “Walk out.”

That’s it – walk out.  If you find a seller who has a $900,000 house in the Beaches who wants to list at $1,199,000, then simply turn around, and walk out.  It’s not worth your time, and it throws the market out of whack.

But many Realtors “hope” that they’ll get the magical offer for 130% of fair market value, or that they’ll talk their seller down into several price reductions.

These are the same Realtors that let their clients play pricing games.  No professional would ever let their client re-list at $949,000 when the house didn’t get a single offer at $849,000.  It just doesn’t make sense.

So I challenge all Realtors to simply WAKE UP!

Act like a professional.  Act like you have value in this industry.  Show your experience and your knowledge.

Don’t just take that $299,000 condo listing with a tenant who has three dogs and list it at $379,900 because you “have nothing else to work on right now.”  Do your job!  Show the seller what the property is really worth!  Bring them the comparable sales.  Explain the value of staging, cleaning, and painting.  Break down the financial ramifications of moving out the tenant, prettying up the unit, and selling it in better condition while eating two months carrying cost.

Too many Realtors are making moves that defy all logic, and I as I write this, my colleague is calling me to point me back to a house I’ve talked about before…

Listed at $999,000 with a hold back on offers, it was re-listed with another brokerage for $949,000, then re-listed at $879,000 with a hold-back on offers, then re-listed for $929,000.

Well, today they re-listed at $999,000.  Yes – really!  My colleague called me just now and said, “You won’t believe what the F*****s at XXX Street just did!”

That house was on the market at $929,000 for three weeks with no sale, so why did they RAISE the price to $999,000?  They were on the market in April at $999,000 with no sale, so what makes them think they can get that price now?

I fault the Realtor for this.

The seller is delusional – I understand.  But the Realtor should walk away from this mess, and stop dreaming about the day that the house sells and they get a cheque with their name on it.

Some Realtors think of their time as a sunk cost.  “I’ve spent two months on this already, I’m not walking away now.”  Well what if you spent another four months on it, and it still didn’t amount to a sale?

I’ve said it before and I’ll say it again: you can’t sell a $20-bill for $26.50, no matter how hard you try.

So when a potential seller asks you to do exactly that, why would you agree?

For those people who are new to my blog, I hope you follow my logic here, and don’t conclude, “Soooo……David is saying that he won’t work hard and get me a good price for my house?”  That’s not what I’m saying.

I’m saying that just as a parent tells a child, “No, Bobby, you can’t bring the toaster into the bathtub with you,” a Realtor must have the guts to tell his or her seller, “We didn’t get a single offer for this house at $799,000, so re-listing tomorrow at $879,000 is a terrible idea, and a complete and utter waste of our time.”

That’s it, folks!

Realtors are to blame for this mess, not the sellers.

You can’t blame a blind person for walking into a wall if you’re standing idly by and doing nothing to stop it…

10 Comments

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  1. Brad says:

    There is a lot that can be commented on in that post but I’m going to just keep this one simple and on one point.

    When agents stop underpricing assets to take advantage of buyers who get pulled into a shell game where they don’t truly know what they are paying for ….then…agents will be respected as true professionals.

    The worst practice in the profession is the intentional under price one. It’s honestly undermining the entire industry.

  2. Chuck says:

    This question tends to work well in some situations.

    “Do you want to be a listing… or do you want to be a seller?”

    The key to having realistic sellers is to get them thinking like a buyer would think. The more skilled the agent is at helping people through that mindset shift, the less friction in choosing the price.

  3. Duncan says:

    Very well said David, in fact if you apply the old 80/20 rule, there would probably be only 7000 agents actually getting the listings and selling and selling them.

    I’ve never understood the “Over Priced Listing”, for the agent it’s a no win, sellers are upset that the agent hasn’t sold the house and the agent is forking out fees and expenses with very little hope of recouping the costs.

    You know as a Property Stylist (stager) the first question I always ask the agent is whether the home is priced right. If the home is priced too high for the market I often won’t take the staging job. No matter how good the agent is at marketing and no matter what I do to a house/condo I can’t make a $700k home worth $850K. And if the seller doesn’t blame the agent for the house not selling, then they will blame the stager!

  4. Ralph Cramdown says:

    The seller doesn’t get the median price of similar units, or the consensus value that active buyers place on the property. The seller gets what that one magical (possibly uninformed or downright idiotic) buyer is willing and able to pay.

    So you called the LA, talked about his pricing games and showed the unit. How is this supposed to dissuade him from from his behaviour? He listed, repriced, got a showing. I hope you submitted a low offer. That would give the agent something to discuss with the seller, and the seller something to stew over for the next 48 hours and then the next 60 days. But if all you do is show the place, the LA reports to his client that “we’re getting interest and showings at this price” — hardly the sort of behaviour that will lead the seller to fire the agent.

    Unless boards give customers the tools to judge agent quality (and that’ll NEVER happen), agents are incentivised to have more listings, more DOM and more reprices. All those lawn signs, MLS listings on their web page and emails that go out with every price change look, to the public, like a more active and successful agent than the guy who only has 0 or 1 listing at any time because he’s selective. Since the board’s advice is always “ask your friends and relatives to recommend an agent,” for a young agent to turn down a listing is career suicide. When he’s been in the business a few years he can sniff about the other agents who buy listings.

  5. Dave says:

    Hi David,
    I am studying to become an agent for the T.O area and the 35,000 agents in T.O is a staggering number and actually blew my mind. But in terms of your rant, I think it’s a lack of common sense and greed on the part of the selling agent. Once I become an agent, I won’t be like that at all. (hopefully…lol)

    1. Ralph Cramdown says:

      The selling agent got the listing. That’s not a guarantee he’ll get paid, YET, but he’s got a better shot at it than the agents that turned the listing down. He can get lucky and get a buyer at the price, he can talk the seller into lowering the price, he can meet interested buyers (and maybe represent them or sell them another of his listings) via the sign, MLS or open houses.

      As a consumer, who are you going to list with, the guy who’s got five signs up in your neighbourhood, posters your mailbox with “just listed” flyers and is always holding open houses, or the invisible agent who claims to have sold five properties this year. He says he sold them quickly and with no price drops because he priced them right the first time, but the other guy seems to work harder, so maybe the invisible quick sale agent just prices them low to move them quickly?

      1. @ Ralph

        Good point. Perception is important – valuable, or not.

  6. cquee gee says:

    On the other hand … why not? I know that the market (any market, really) is its own little world with its own dynamic and its own logic. David, I applaud you for your articles emphasizing professionalism. An outsider like me truly needs the assistance of a professional when the stakes are so high. But that’s the thing: the numbers involved (esp for single family homes) are so high compared to incomes that the numbers seem arbitrary. $879,000 vs $949,000 makes as little difference to me as the difference between the distances of Venus and Neptune. Sure, it would be great to “save” 70K via the advice of a savvy agent, but it would be a pyrrhic victory. There’s little chance of me making over a million after-tax dollars in my lifetime. Dang, veered off topic. Keep up the great work!

  7. Joe Q. says:

    I think you hit the nail on the head with this:

    There are 35,000 Realtors working in the GTA, and I think 15,000 could probably handle the load.

    35,000 Realtors in an area with 5.5 million people and 2.8 people per household. Works out to one Realtor for every 55 households (more or less).

  8. Sylvain W. says:

    Couldn’t have said it better myself David :)-

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