Buyers are tired of seeing a property up for sale at a given price, only to see the seller change the price later on – having never had any intention of letting the property go at the original list price.
Is this fair game? What are the “rules” in real estate?
Is this just a case of buyer-beware, or do you really, really believe that if a seller lists his or her house for $1, that they should be somehow “forced” to accept that price if it were offered to them?
The opinions on this one will differ, depending on where you find yourself in the market, but ignoring the extremes, let’s look at a couple of more reasonable examples…
(N.B. – look at the photo closely in case you didn’t get it….)
Last week, I showed a condo to a prospective buyer, which was listed at $424,900.
It was a great unit, no doubt about it. But it wasn’t unique, and it wasn’t “special.”
“Special” was the unit I just sold at Kensington Lofts, on the first day of the listing, for full-price. It was well-priced in my opinion, and my buyer-client had narrowed his search down to ONLY that building, and only a 1,000 square foot, open-concept unit. Suffice it to say – we knew within ten seconds of entering the condo that this was “the one.”
“Special” is hard to define, and it differs from buyer to buyer. But unless the unit is exceptionally unique, rarely-offered, and/or in a small building where units almost never come out, then I really don’t know how we define “special” as it pertains to condos.
The $424,900 condo I showed last week was NOT special. It was not unique in any way, nor was it a rare offering. It was just another condo, albeit a nice one, with great upgrades, a perfect floor plan, and even an outdoor space.
In the broker’s notes of the listing, it read, “Offers, If Any, Reviewed On May 14th At 7pm,” and I wondered about those words “if any.”
First of all, I really don’t think we’re in the market climate to be holding back offers on condos.
Secondly, if we did hold back offers on condos, it wouldn’t be on this one.
But most importantly, what would happen “if any” was actually zero? What would the seller and the listing agent do if there were no offers?
Think of how this works in any other industry.
Let’s say you’re The Gap, and you put out a new clothing line. It’s on the mannequin the window, it’s in the TV ads, and prominently featured in advertising. And let’s say you sell ZERO of those pieces of clothing.
What do you do then?
Pffff…….obviously. Since nobody wants to buy them, you RAISE the price!
Right?
Wait……what? You disagree?
Well no @$*!@$*$!
In the case of this $424,900 condo, after receiving no offers, the listing agent re-listed at $448,900, which I found amazing, bewildering, insane, and yet, I wasn’t surprised at all…
She called me for feedback on my showing before offer night came and went, and I told her, “It’s nice, I just don’t know if it’s something my client wants to jump on.”
She said, “Well, we’re taking offers two nights from now, so tick-tock!”
She was kind, and didn’t mean that in a condescending way. But I really wondered what would happen if they got no offers!
Ironically, she called me after the offer day came and went, and told me that the unit was still available. I asked, “So are they throwing in all the staging furniture?”
She didn’t follow.
I said, “Well you raised the price by $24,000. So what else is the buyer getting?”
She confidently replied, “Well, that was the price before. That was when we were trying for multiple offers. This new price more accurately reflects fair market value.”
Oh come on!
Two things I hate to hear:
1) “Did you know that this property was priced for multiple offers?”
My response: “Note the word ‘was’ in that sentence, since you DIDN’T get multiple offers. If it were priced for multiple offers, wouldn’t you have got multiple offers?”
2) “This price more accurately reflects fair market value.”
My response: “No, I think your first price more accurately reflected fair market value, since nobody was willing to pay that price, and your new price is higher, thus less accurately reflecting fair market value.”
Trust me folks – I’ve had these two conversations, many, many times….
So as you can tell from the title of this blog post, I’m wondering if the public considers this a “bait-and-switch.”
Isn’t it?
I mean, if a shirt in a store had a tag that read $9.99, and you brought it up to the counter, they can’t try to charge you $12.99, can they? Isn’t that illegal?
So why is real estate any different, you ask?
Well it’s simple: no seller is under any sort of obligation to sell his or her house for any price.
And that’s the way it should be.
But if your house is listed for $599,000, and you turn down a $620,000 offer, you must re-list your house for $620,001 the next day, or be guilty of false advertising.
A blog reader emailed me over the weekend and told me that her friend had offered $700,000 on a $699,900 property on “offer night,” and offer was refused, and the property was re-listed at $829,000.
In this case, the listing agent never signed the offer back; he just kept saying “bring us your best offer” over and over. He was essentially asking this buyer to bid against herself.
Can this buyer be frustrated with the so-called “bait and switch?”
The house was offered at $699,900.
The seller refused $700,000.
Isn’t this a bait-and-switch? Isn’t it false advertising?
I wish my questions were less rhetorical, folks. This is a massive grey area in real estate, but the grey pertains to ethics, and not to law.
There’s nothing illegal about a bait-and-switch; just frustrating.
When I see a condo listed for sale, with an offer date, I hesitate to even show the property. I don’t think we’re in that kind of market, and I don’t want to get my buyers involved in what I call, “Scheduled Disappointment.”
A lot of sellers in this market are delusional, and condo-sellers who think they’re selling a piece of gold (ie. they read too many articles about the housing market), often expect something that is just never coming to them, such as 115% of the asking price.
I have no problem calling a listing agent of a condo and asking flat-out, “What is the deal with this offer date? Are you just trying to expose it to the market for seven days so you can get some cold calls and do an open house? Or is your seller expecting multiple offers?”
Some agents will answer you honestly. And some waste your time and say, “Well, I guess we won’t know until offer night, will we?”
I’ll tell them, “Listen, I can sell this condo for you, tonight, for the full asking price. Is that something you’d be interested in?”
A good agent will answer openly. An experienced, reasonable agent will say, “Yeah, honestly, if you can bring me the asking price, then let’s do it. My client is just a bit overwhelmed with all this, and his mother is telling him to ask for more money.”
Or, that same good, experienced agent might say, “Look, my client wants to handle the listing in a certain way, and I know it’s tough to advise your buyer. Just show the condo, and if they like it, then we can chat further. I don’t know what to expect. Seriously, it wouldn’t surprise me to see no offers, and it wouldn’t surprise me to see a couple. You know this market – it’s nuts.”
Either answer is acceptable, depending on the seller’s expectations, and wishes. After all – we work for the sellers, when we’re listing their properties!
A clueless agent, who has no idea how to talk to colleagues, and who is over-confident for a multitude of possible reasons, will reply, “As it stands right now, we’re waiting for offer night, and we would NOT accept the asking price. This property is priced very well, and we expect that the market will respond accordingly.”
That agent just talked himself out of:
1) A showing
2) A potential buyer
3) A potential offer that could compete against any other offer
And that agent is a classic candidate to pull the “bait-and-switch.”
I’m not saying I won’t show a condo with an offer-date, under any circumstances, but I am saying that I tread carefully, and try to avoid that “Scheduled Disappointment.” If I come across the clueless agent that I described above, I might tell my buyer-client that there’s a good chance he or she will be disappointed next Thursday when the property comes out onto the market at a HIGHER price. We can still see the condo, no problem.
But beware the bait-and-switch…
Darren
at 7:34 am
If an offer is made, without conditions that matches the asking price then the sale should be binding if a competing offer is not received within a certain time. I often wonder that if someone with time and money on their hands was to take legal action against such a seller, what would the court decide?
Kyle
at 9:02 am
The courts would throw this case out, as there is nothing remotely illegal about it. As far as a court is concerned q buyer’s frustration is not considered damages, especially when it can very easily be argued that a buyer and his agent are very naive, dare i say delusional to expect that a seller and his agent should give a crap about his emotions.
Darren
at 9:20 am
But is it illegal? It would not be legal in a shop, why is it legal here? I’m not saying you’re wrong, but I’d like some more concrete information.
Kyle
at 9:36 am
Per David above,
“I wish my questions were less rhetorical, folks. This is a massive grey area in real estate, but the grey pertains to ethics, and not to law.
There’s nothing illegal about a bait-and-switch; just frustrating.”
The reality is unless the seller signs and all conditions are met, you don’t have an accepted offer, and the courts can not compel the seller to accept something he neither wants nor has agreed to.
Darren
at 9:40 am
David’s opinion is not necessarily a fact. I’m looking for legislative exemptions or legal precedents. Other than being popular belief, how do we know this behavior is legal?
Kyle
at 9:51 am
But, assume David and i are right for a second, that means you are looking for something concrete that probably doesn’t exist. Laws are not written to say what is acceptable they are written to say what is not acceptable. So to be clear, to prove this you would need to find a law or a precedent saying that this is in fact illegal, not the other way around. And given the way common law works, if there were precedents then highly unlikely that this practice would persist with regularity.
Joe Q.
at 10:03 am
Darren, I believe that while it would indeed not be legal in a shop, federal law specifically exempts individuals from regulations surrounding false advertising.
Darren
at 10:43 am
So in other words, nobody has ever challenged this. As I stated in my first post, it would be interesting to see what would happen if someone did. What would the court say to a seller who rejected an offer at asking price, with all other variables favourable to the seller then relisted at a higher price? I don’t know but I would love to see what happens. Until someone does challenge the status quo, to say something is perfectly legal is not entirely accurate.
As for Joe. What laws are you referring to. I’d like to read them.
Kyle
at 10:50 am
@ Darren
“Until someone does challenge the status quo, to say something is perfectly legal is not entirely accurate.”
Actually it is accurate, the way common law works is that until someone successfully challenges it, it actually is perfectly legal. If and only after it is successfully challenged, does it not become perfectly legal, from that point on.
Joe Q.
at 11:08 am
Darren, I think it is in the Competition Act, as mentioned by another commenter. Don’t know which subsection etc.
Geoff
at 3:12 pm
Every offer has some conditions on it, even if it’s just a closing day. There’s no law on when deals must close. We turned down an offer that paid more money because they were inflexible on the closing day, and to us the hassle of trying to move out 3 days earlier wasn’t worth the $1000 extra cost.
ConfuzEd
at 8:30 am
“But if your house is listed for $599,000, and you turn down a $620,000 offer, you must re-list your house for $620,001 the next day, or be guilty of false advertising.”
Please elaborate on this comment. Neither Comprtition law nor Consumer Protection apply to individual sellers of real estate as far as my limited legal awareness is concerned.
What is your source, if any?
Geoff
at 8:40 am
I agree, more details required.
What if the offer for $620,000 came with a $500 deposit and a 208 day closing date? And was conditional on the sellers selling their home and finding their lost dog?
Price isn’t everything in selling a house.
ScottyP
at 9:30 am
“Price isn’t everything in selling a house.”
^ THAT.
Any talk of “challenging” the legality of a seller choosing to refuse all offers at or around the listed price may sound good in a pub over a pint of Murphy’s, but is completely fanciful and, dare I say it, totally impractical.
jeff316
at 8:01 pm
Yes. This. Finally. THANK YOU THANK YOU THANK YOU
ANoder
at 1:47 pm
Bait and switch is actually illegal per Competition Law, this however is not a bait and switch and It is false to say that the relisted price must now be higher. Selling property falls under the common law known as “an invitation to treat.”
This article by lawyer Mark Weisleder titled “$1 real estate listings are legal, but they don’t often work” should help to finally dispel that notion from TRB.
http://www.markweisleder.com/docs/REA040Docs/Submit/mw_pdf/11torontostararticle1021.pdf
Joe Q.
at 9:29 am
For those interested in the concept of “invitation to treat”, Wikipedia has articles on that subject (which focus on the British common law from which ours is derived) as well as Canadian contract law.
Invitation to treat, from my understanding, is most often applied in cases like tenders. One can understand why the general public would have a hard time accepting the idea of something like a classified ad service (the public MLS) in which prices are listed, yet have no objective meaning.
As I mentioned earlier, my understanding of RE greatly increased with the realization that MLS list prices are about marketing only, and have no actual legal significance.
Kyle
at 9:28 am
Given that there is absolutely nothing illegal about these pricing practices, perhaps the solution to reducing buyer frustration is for buyers and their agents to not be so bloody simple and naive. The seller and his agent owe the buyer NOTHING. They have no interest in looking out for the buyer’s best financial or emotional interest, and expecting them to is just asking for disappointment. Yes it is in a selling agent’s interest to play nice for his reputation and to facilitate future transactions with the buying agent, but beyond that the selling agent is working solely for the seller. And the seller does not care at all about “repeat business” or “customer satisfaction”, so again it is naive and delusional to compare this type of transaction to other forms of commerce or advertising.
David’s approach and guidance to his buyer clients seems like the most reasonable one to take, which is to fully educate and arm his buyer clients, and to manage their expectations. That way they are going in with eyes wide open, with a full understanding of what the likely outcomes are.
ScottyP
at 9:56 am
100% correct. Add what Geoff said above about how “Price is not everything in selling a house”, and the debate (if there ever was one) ends there.
There are conditions, there are closing dates, there are financing issues, there are second thoughts. And the seller has every right to take these and other factors into consideration when determining whether to accept or decline an offer. The amount offered as it compares to the list price is irrelevant. The feelings of the buyers are irrelevant.
The fact that under-listing has become an effective marketing ploy that attracts the attention of stupid buyers and stupider agents may be regrettable, but it too is irrelevant. Under-listing is not illegal, should not be illegal, and should spur buyers to take half a freakin’ hour to research how things are done and how life works in this extremely seller-friendly market.
Suggesting that nonsensical laws or judgments of the court be put forth so as to protect idiots from their own idiocy makes zero sense, and should not even be posited on a blog of this calibre.
F. Realtors, and F. MLS.
at 2:11 pm
“The fact that under-listing has become an effective marketing ploy that attracts the attention of stupid buyers and stupider agents may be regrettable” So buyers are ‘stupid’ because sellers are purposefully misleading and playing these games? Fuck me for expecting not to be screwed over by these “professional” Realtors.
Joe Q.
at 9:45 am
I will admit that my understanding of the real-estate market increased dramatically when I learned that the list price of a home has absolutely no commercial or legal significance.
joel
at 10:43 am
I am wondering how much of these situations is derived from an agent wanting to say that they sold “over asking“ , how much is from them telling their clients that they are going to get $x over asking and how much is the seller with a delusion of what their property is worth.
Any realtors, your past experiences would be appreciated.
frank
at 4:18 pm
Public perception will be negatively affected by the numerous ethical concerns with some RE agents and Provincial/National real estate boards. Sellers are as dumb as buyers and think that they’re entitled to 115% because that’s what the local real estate boards, Media and banks tell them. These ethical concerns happen all the time in many industries. The problem with Real Estate is that your not buying a bag of chips or a shirt, you’re committing a good portion of your salary for a very long time and there is significant impact to your life.
Omar
at 5:18 pm
Hey guys I wanted you guys to check out my house that I have on sale and give me some input on it. That would be greatly appreciated.
the website for it is http://www.158angier.com
and the listing number on MLS is # 1404619b
mikeM
at 12:38 pm
Nice dandelions in front yard. The flooring will look nicer if subject to brighter lightings.
ScottyP
at 10:05 am
What Mike said. Manicure the front lawn, hire a professional photographer who will use proper lighting techniques indoors, and have him or her shoot the outside shots on a sunny day (while taking into consideration the time of day and positioning of the sun).
Your house looks nice enough, but the photos don’t do it justice.
Potato
at 7:36 pm
IMHO part of the problem is that asking prices that are legitimate are indistinguishable from those that are not. If the listing had come out at $1 that would be a clear signal, indisputably, that the sellers were looking for an auction/bidding war and hoping the market would determine the price for them. But a listing at $424,900 gives you no clue as to whether that’s actually the price to open negotiations, or whether the sellers have priced it “below market for multiples” — and even then, you have no way of knowing whether they’re expecting $20,000 more or $200,000.
If sellers don’t want to use the common understanding of asking price, they should at least work out a signalling system. For instance, you could code the amount over you’re expecting in tens of thousands in the last two digits of the price: if your buyers saw a listing at $424,906 you could say “forget it, it’s priced for multiples.” and your clients might say “well that’s fine, we can go $440k on it.” “No, the last digit’s a 6 so they’re looking for 60,000 over, we’ll never be able to work with them.”
Chris
at 8:18 pm
After reading this forum and understanding everyones frustration in regards to the misleading advertising of sale price. There is no legal ramifications when a home owner amends its purchase price subsequent to an offer being made. One must consider that a homeowner has the right to charge what he pleases notwithstanding that such representation may be amended in the future. When it comes to real estate transactions and pricing the court has deferred its involvement to the real estate market and will not intervene in free market negotiation. If anyone is interested the consumer transactions for real estate exemption provision falls under the Consumer Protection Act S. 2(2)(f).
crazyegg
at 11:39 pm
Hi All,
Stop blaming the sellers, buyers and listing agents. The burden needs to rest solely on the Buyer Agent. The BAs need to be well informed of all the historical pricing action so as to have a valid prediction of the selling price.
More importantly, the BA needs to communicate / educate his clients on the current craziness in the Toronto market. Know when to run away to fight another day instead of submitting an ultra lowball offer.
Regards,
ed…
Jim
at 11:44 am
Buying N Selling real estate is really an auction with a reserved bid. As a consumer, I hate the sales tactic used by this agent.
Too bad the GTA is serviced by too many out of owners and newbies. I would like to see more wise and nimble professionals around.
Chroscklh
at 4:07 pm
It is frustrating yes, but equally frustrate to receive bully offer of 700,001 when listing at 699,900 and have agent say “What? it’s list?” You know what we do here, agent guy. I cannot confirm but I heard anecdote that agent SUED client for commission when clients had several offers at or better than list an did not accept. Agent reasoned he had done his job, was having his time wasted. Clearly agent was not on record as saying “you list 699 but don’t accept anything below 885” or he would have lost. My guess he frustrate with clients indecisiveness – but that interesting prescident, if true. Back home, commission declines each week listing is on, so they say list 300 million Kuza when house worth 2 billion Kuza – get bidding war
Geoff
at 4:28 pm
@ Chroscklh,
In Canada, you bid on houses!
In Soviet Russia, houses bid on you!
Joe Q.
at 9:14 am
I was wondering how long it would take for the “In Soviet Russia” jokes to start.
Chroscklh
at 9:30 am
Is may be true in Soviet Russia. In my country, you must present offer in person on back of Yack or cart horse (sign of respect) – very problematic for condo
Amelia
at 10:37 am
lol @ “Scheduled Disappointment” …
I’m going to use that David.