“They’re going to do it, just watch,” I told my colleague as he shook his head and said, “They can’t.”
But I’m more cynical than my colleague.
More experienced too, but I think the cynicism is more important in this regard.
Where some people might look to see logic, reasoning, and some semblance of normalcy, I’ve been trained to anticipate poor judgment, fantasy, and whatever other descriptions you can conjure up to explain something that just won’t work.
“Insanity” is defined as doing the same thing over and over, and expecting a different result.
And those of you who have been reading TRB for years, will probably think you’ve read this blog post before. But I assure you, it’s a different story. Just with the same theme.
If you read my “More MLS Musings” posts, you know that I have my “favourites.” My favourite example of real estate agents doing terrible jobs, which frustrates me beyond belief, but which makes me laugh, nevertheless. The agents who capture themselves in the mirror when taking photos (when a professional photographer should have been hired), the photos of inanimate objects, or close-ups of faucet running, and how about photos of the home-owners sitting on the couch? I have one of those queued up for the next edition…
So when it comes to the topic of “awful listing strategies,” you shouldn’t be surprised to know that I have a favourite there as well.
I love the agents who list the same property, over and over, with different “strategies” regarding the price, when all the while, they’re merely grasping at straws, as they price up, and down, up and down.
Know what I mean?
For those agents who list at, say, $999,900 with an “offer date,” hoping to end up with multiple offers, and a sale price of $1,200,000, who are not successful on offer night, then terminating that listing at $999,900, and subsequently re-listing the next day at $1,199,900 with “offers any time” is a reasonable course of action.
You can admit that your “strategy” of under-listing and holding-back offers (if you can call it a “strategy”…) didn’t work, and thus you have no choice but to list at a higher price, one which, presumably, is some combination of fair market value and that which the seller desires.
I have done this exactly once in my career, and it was in May of 2017 right after the market dropped. I’m pleased to say that pricing games are not my favourite past-time.
But what do you make of a situation when the property comes out at a low price, then the price is raised, then it’s dropped again, then it’s raised, and so on?
It’s brutal.
And nothing short of moronic.
I would speculate that in almost all of these cases, it’s not the fault of the market, or the time of year, or the buyer pool, or even the listing agent for not doing his or her job. It’s simply that the seller wants too much money.
Age-old story, right?
There’s one house I’ve been watching on the east side for quite some time now, and while I don’t take pleasure in the shortcomings of others, I will say that “I was right” from the start. I knew this house wouldn’t sell, but more than that – I knew it would be re-listed over and over.
How can you tell?
Well there are a variety of factors, including, but not limited to: the listing agent is out-of-area (and while I know some people think their cousin from Hamilton is just as capable of successfully listing and selling a house in Davisville Village for top dollar, but they’re not), the house was over-priced to begin with, the renovation is not what buyers in this demographic are looking for (meaning the owner/renovator didn’t do any homework), the choice in features/finishes is odd, and the best part – the agent had no problem blatantly lying on the listing. I don’t know in what area this flies:
Front parking pad eh?
Guess what?
Anybody can look up legal front parking pads through the city of Toronto through this link:
https://www.toronto.ca/data/transportation/residential_locations/residential_locations.pdf
The fact that the parking isn’t legal is an issue, since the owner is factoring in $75,000 for a spot, when the buyer pool isn’t, but my bigger concern is that neither the agent or the seller thought it was an issue to detail this on the listing. It shows they don’t know their buyer pool, and they’re taking liberties.
This house came onto the market in mid-December for $1,499,000, and again, I can’t say that listing in mid-December, in this area, was a good decision.
But nevertheless, the price was the issue! Price and strategy.
First and foremost, this house was never going to be worth $1.5M. It was probably worth $1.3M, maybe a bit more. It was on the worst street in the area, backing onto a major road that’s home to commercial buildings.
But secondly, and most importantly, there was an “offer date.”
My inner cynical old man was going nuts.
“Wait, so you’re priced at $1.5M and you have a hold-back on offers? Oh, and you’ve got ‘Seller Reserves The Right To Review Pre-Emptive Offers’ written on the listing? How presumptuous! Oh please, oh please let me submit a pre-emptive offer! Will you review it? You will? Oh goodie!”
Oh puke!
Talk about misreading the market!
If this was listed at $1,199,900, with a holdback on offers, then okay. I understand the strategy.
But the high price and the holdback on offers is like asking your Dad to borrow the car, but telling him you want to down a 6-pack first.
Surprise of all surprises, this property did not sell on offer night. I mean, it also didn’t sell with a pre-emptive offer, but frogs have also never rained from the sky (that we know of…).
The listing was terminated just before Christmas (because that’s such a great time to be on the market…), and clearly the buyer pool lamented their opportunity to “bid” on this wonderful offering.
But, buyers rejoice!
The house reappeared in early-January at a new price: $1,099,900.
Huzzah! The same house that didn’t sell last year, now $400,000 cheaper?
Yes, it’s true. Except it’s not really available at $1,099,900, you see, the seller and the agent have devised this brilliant strategy of under-listing the home, and then holding back offers. I know, I know – it’s such a novel concept that it’s tough to comprehend, but this is the genius behind the $400,000 price drop, even if they have already signaled to the market that they actually want $1.5 Million.
But wait…..
…..do they want $1.5 Million?
Would they “settle” for a mere $1.5 Million, I meant to ask?
But of course not!
The first time they were on the market, they listed at $1.5 Million, held back offers with the expectations of getting more, and then upon receiving zero interest, they terminated the listing. So suffice it to say, they would not “settle” for a paltry mill-and-a-half.
This became even more apparent one week later when, surprise, surprise, the $1,099,900 listing was terminated, and the house was re-listed at….
$1,549,000!
“If at first you don’t succeed, try, try again.”
That’s how the saying goes, but I think the way the saying was intended had the assumption that you would not try the exact same method fruitlessly, when you yourself were not in control of the outcome.
These sellers can wish and dream all they want, but eventually they have to come back to reality. No?
This house is simply not worth what they are asking. Not even close.
And the funny thing is – there’s nothing for sale in this area. Buyers are starving for listings, so if there was ever a time and a set of circumstances when this would work, it would be now.
But it won’t.
I mean, it didn’t.
Because the house was on the market for $1,549,000 for exactly one month, and then the listing was terminated.
But……and there’s always a but….
…..guess whaaaaaaaat?
The seller and the agent have a new strategy!
After listing “low” at $1.5 Million and holding back offers, unsuccessfully, they re-listed even lower at $1.1 Million, again, holding back offers unsuccessfully, then raised the price to $1.55 Million.
So what’s the new strategy you ask?
How about going right back to the well for another delicious wooden-cup full of well-water?
Yup, they’re now on the market for $1,299,900, with an offer night.
Because using the same failed strategy only four weeks after you had previously used it, and failed, is a great way to succeed.
I believe the kids say, “Double-yoo-tee-eff?”
I don’t understand it.
I mean, I understand the greed, but I don’t understand the stupidity.
The other day, I was playing hide-and-go-seek with my daughter, which was really cute, and really fun.
She hid in the hall closet, and even though I knew she was in there, I did what a Dad is supposed to do, and walked around asking aloud, “Has anyone seen Maya?” And even though I could hear her giggling in the closet from twenty feet away, I continued to look around until she couldn’t take it anymore, and stuck her head out to say, “I’m in here, DaDa!”
We played a subsequent round with me hiding (they never find you behind the curtains, but you have to turn your feet parallel to the baseboards), and eventually my wife helped Maya find me, and we had a laugh.
Then Maya said, “My turn now, DaDa,” and I closed my eyes, and waited for her to hide.
I’ll give you one guess where she hid.
Those of you with kids already know.
She hid in the closet, again.
She went right back to where she hid before; same strategy, even though she knew that I had seen her implement this strategy before.
It wouldn’t make any sense, except for the fact that my daughter is 2-years-old. So she thinks I’m of the exact same mental capacity as she is.
That’s exactly what’s going on with the sellers of this house described above, except they are, more than likely, not 2-years-old.
They seem to think that even though they showed their hand at $1.5M last December, then again at $1.55M last month, they can re-list “low” with an offer date, for the second time, and yet some way, some how, the buyer pool won’t expect to find them hiding in the closet yet again…
Verbal Kint
at 7:32 am
Listed Sept.12 $899,000 Terminated Sept. 21
Listed Sept. 21 $1,099,900 Terminated Oct. 2
Listed Oct 2 $1,029,000 Sold Oct 4 for $975,000
That was yours, right? The description starts with your signature “Welcome To The St. Lawrence Market!” And TREB duly reports it as selling for 95% of list in 2 days?
ChT
at 8:19 am
What’s your point?
Alessandra
at 9:15 am
100% this guy is a real estate agent.
Big man hiding behind a keyboard.
Chris
at 9:01 am
Good article looking at uneven distribution of inventory build-up in Toronto’s neighborhoods:
https://www.theglobeandmail.com/real-estate/toronto/article-inventory-building-up-in-torontos-housing-market/
“In all of 2018, 51 properties that met Mr. Kutyan’s criteria changed hands in the Willowdale sample and the average sale price was $2,727,330. At that pace, it would take 10 months to sell the 42 houses for sale – if no new supply arrives on the market.
In the area he surveyed south of Highway 401, Mr. Kutyan found 120 sales in 2018 that met his search criteria and the average sale price was $2,490,370. If that pace of sales keeps up, the area – which includes such neighbourhoods as Bedford Park, Ledbury Park and St. Andrews-York Mills – has 2.7 months of inventory.”
Appraiser
at 1:58 pm
All real estate is local.
Chris
at 2:06 pm
Thank you for your fantastic insight.
Appraiser
at 12:08 pm
Hey has the crash / recession happened yet? It’s March now, let me know.
In the mean time, Ontario adds 37,000 (net) mostly full-time jobs in February!
https://www150.statcan.gc.ca/n1/daily-quotidien/190308/dq190308a-eng.htm?HPA=1
Chris
at 1:12 pm
Canadian Housing Market This Bad Normally Means Recession: BMO
https://m.huffingtonpost.ca/2019/03/06/canadian-housing-market-bmo-recession_a_23685930/
In the mean time, British Columbia added 3,600 jobs in same report, yet Vancouver benchmark detached price down 10% YoY, condos down 4%!
Derek
at 2:01 pm
App, if this was 1989, for how many consecutive months would you have commented, “hey has the crash happened?” before looking back to see the crash happened?
Condodweller
at 2:10 pm
What do you mean? There was no crash in 89! It was a myth perpetuated by a bunch of bears…
Derek
at 9:58 am
Condo, I’m not pretending to know what is happening, or even trying to argue one way or the other. My point is that I am not sure that anyone could say the market is “crashing” or not, in real time.
Robert
at 10:17 am
Very sorry to say it, but it’s realtors who created this bullshit offer date concept/games and I partially blame this marketing invention for inflated market. Underlisting properties and then bragging about “Sold X overasking” created panic in the market starting from about 2015. And now it’s funny to observe when one realtor is playing game differently than “commonly established practice of underlisting” then other realtor complains that he is not following the “standard way”. If it was up to me I would ban any sort of price games and charge realtors for deliberately underlisting properties. The only problem it’s almost impossible to enforce. Maybe market would be much more stable today if this bullshit price games were not invented by realtors.
Housing Bear
at 10:44 am
While the stories of multiple bids and sold over asking are stories the RE cartel loves to push in the media (adds to fomo) the underlist/ hard offer date strategy can only work in an already over heated market. The market drove the practices not the other way around.
All RE markets across the globe, with differing legal and sales frameworks, have gone through booms and busts. Nothing special about Canada.
Kyle
at 11:07 am
After reading this blog by David, i sit back and feel comforted in knowing that the market works. You can’t out-game the market.
It is not the pricing strategies or under listing that drove the market higher, it was high demand and dwindling supply. FOMO was caused by scarcity, not pricing games.
Robert
at 11:40 am
I have several friends who jumped into market in 2015 just because FOMO kicked in that “If I don’t buy now, I would never be able to buy”. Now looking back from 2019 point of view, so far they were right with their FOMO and good for them that they bought. That FOMO was partially created by stories like “Sold X overasking” and for regular people they did not know about underlisting techniques etc. Maybe it’s not black and white but I guarantee that “underlisting” and “blind bidding wars” techniques added a lot of fuel to existing fire. This fire would not be as big without it
Kyle
at 12:17 pm
Under listing has been around since before 2003, when i bought my first house. Anyone seriously shopping for a house in Toronto is well acquainted with the practice and knows the “Sold over asking” signs have much more to do with listing under market.
Also those “Sold over asking” signs are actually meant to target potential sellers not buyers. Clearly they weren’t working to drive more supply (since supply shrank to record lows), so if sellers can see through the game, it is not reasonable to think all the buyers out there are dumb enough to fall for it.
Seeing the actual sales prices rapidly rise during the period is actually what caused the FOMO (i.e. the market not the games).
Jennifer
at 12:57 pm
You can’t advertise sold over asking if you under listed, way below what the seller would accept. Then the press picks it up and makes a story out of a non-story (especially when it is way under-listed, think Kutyan lists, agent mentioned above). Whoever these ads target, it’s misleading and false. “Sold over asking” was valid way back in the days when for the most part, the house was listed in and around what the seller was willing to accept. Now it’s just nonsense that must be banned. It doesn’t help anybody, and quiet frankly, agents look silly advertising that.
Kyle
at 1:45 pm
I don’t disagree with you on any of that. I’m not arguing that “Sold Over Asking” marketing is good marketing for the Agent or is ethical or should/shouldn’t be allowed.
I’m just saying that these signs and tactics are ineffective and don’t sway the ultimate price. A buyer would have to be super-stupid to not be aware of the under-listing practice. Especially when the majority of houses in Toronto have been sold over asking for the last decade and a half, it simply isn’t realistic to think that buyers are dumb enough to fall for this.
But let me suspend my disbelief for a second and play this out. Let’s say a buyer is unrealistic enough to think the list price of an under-listed house was what the seller wanted. The buyer would never have a chance in hell of buying it, and therefore the sale would never happen. And therefore any buyer who is dumb enough to be taken by these signs is never actually going to drive up the price, because they never end up transacting.
Price discovery (i.e. the market) will happen whether you list for $1, for 50% under, 50% over, or whether an Agent take credit for something he didn’t deserve or not. It doesn’t matter where you start, the end point will be the intersection of what the buyer was willing to pay and what the seller was willing to accept.
Jennifer
at 12:59 pm
The games are positively a factor in the prices we are at now.
Robert
at 3:09 pm
In normal environment people shop around before they make decision to buy certain house. In environment that realtors created where every house is underlisted and there is blind bidding war, buyers are put in panic mode. First they don’t have time because offer dates force the rush. Second they have to blindly bid higher to secure the house, which drives prices up faster. Dave probably has lots of story back from 2017 when the difference between the first and second bid was quite substantial because people were lost and in panic mode. Long story short – to ensure market stability realtors must be prohibited from intentional underpricing. Also blind bidding should be prohibited.
Condodweller
at 6:54 am
I agree that fomo, blind bidding and agents telling their buyers to offer increasingly higher amounts than fair value drove up prices at an increasing pace.
Note I didn’t say higher amounts about asking above. Reasonably competent agents knew what fair market value was but the trouble was that they added to the fear by telling their buyer clients, playing on their fear, that to secure the deal after having failed multiple times, they need to offer more and more as time went on. It was a sow ball effect.
I can give you a perfect example of this and what the difference was between the first and second bids.
An acquaintance was looking to buy a condo at the peak of the market in 2017 (not for condos as it turned out). They found a one bedroom unit that was literally the best unit in the building. Same size units had sold recently for just above $400k. Adjusting for exposure, floor etc. I thought a reasonable price would be around $450k but it will probably go for at least $475k given the crazy market with which the agent agreed.
We submitted a bully offer just under $500k which was kindly declined and the agent was told that they already had an offer above $500k which they also declined.
The person really liked the unit and really wanted it and in order to secure it submitted mid $500k which even the agent thought was a bit extreme and you know things are getting out of hand when the agent thinks the offer price is high.
When the person asked me what I thought their chance of winning was I told them their offer was on kind crazy but there could be someone else out there even crazier.
On offer night they ended up losing by about $30k to an offer close to $600k.
The problem with this whole scenario is that this crazy price set the standard and future units went for ~$600k that were nothing special.
Appraiser
at 2:04 pm
FOMO and Real Estate Cartel. Garth Turner’s two favorite sayings.