What a mess.
A $299,900 run-of-the-mill condo hits the market, and there is a “hold back” on offers.
This is a classic bait-and-switch, just waiting to happen.
It’s a mess.
It’s a waste of everybody’s time, including the agent and the seller.
It’s a transparent attempt to sway an otherwise unswayable market, and I don’t think it’s going to work.
A condo was listed last week at $299,000 in the midtown area in a building that I like a lot, in which I have several clients.
The unit itself is great; a small 1-bedroom, well laid-out, nice upgrades, and 9-foot ceilings that make a small unit feel large.
There’s no flies on this one, believe me. It’s a great first-time-buyer unit, and I’d be happy to put any of my clients in there.
But there’s a wrinkle, of course, and if you’re following the lead-in, you know exactly what I’m going to say next:
There is a hold-back on offers until January 24th.
In a single word: WHY?
A $299,000 condo? With a hold-back? Why? What’s the point?
Holding-back offers is a time-tested technique to sell real estate, and do so for more than fair market value. We get it. Been there, done that, and we’ve discussed this over and over and beat it to death.
But in this market, and in this climate, why would somebody list a relatively cookie-cutter condo and hold back offers?
I’ll be honest: I have clients looking in this area, and while I’ve sent them the listing, I’ve told them flat out: “I wouldn’t get involved in this mess. It’s a pricing game, and it’s not going to end well.”
Just think about the expectations of the seller…
The same, identical model sold last August for $320,000, listed at $325,000. So that’s the only number you really need to work with. Prices have probably gone down since then, so it’s anybody’s guess what the unit is worth. Maybe $310,000? Or maybe, just maybe, it’s worth the $299,000 that they’re asking.
So what is going to happen on “offer night?”
One of three things:
1) Shameless grinding. Maybe there will be 2-3 offers on the condo like the seller and listing agent are hoping for, but you know that the offers would be $299,000, $302,000, and maybe $304,000 if there’s a third. From there, it’s going to be shameless. The listing agent will grind down the three parties, sending them back over and over, promising them they’ll get the unit, working one off the next, all the while, knowing exactly what price they had in mind to begin with.
2) Bu-Bye! If you offer $299,000, and you’re the only offer, don’t go in with high expectations. There’s a reason for all this gamesmanship, and it’s not because the seller and agent are going to accept the asking price! If you don’t walk away, they will. But nobody is going home with a deal.
3) Inevitable Re-List. The seller always knows best, right? Then you get lines like, “The new price better reflects the true value of the property,” which is usually uttered by a listing agent after my absolute favorite: “This property was priced for multiple offers.”
This is a classic bait-and-switch waiting to happen, and I’d never get involved.
Why not just list at $329,900, and do your job?
Personally, I think that this is a tragic mistake, since there are a LOT of agents and buyers out there that feel the way I do, and who won’t show or view the property. They want to see what happens “when the dust settles,” ie. when the unit doesn’t sell and is re-listed at $324,900 in ten days.
What a monumental waste of everybody’s time, although, it’s a free country, free market, and any seller and/or agent can act however they see fit.
I wouldn’t get involved, plain and simple.
I would never bring a nervous, optimistic first-time-buyer into this type of situation.
Maybe this was somewhat acceptable 2-3 years ago (I still didn’t like it – not at this price point), but in today’s market, I think it’s tantamount to showing up to the nightclub at 1:55am and expecting to have a good time. “Party’s over!”
These folks are way too late to the party, and they’re trying “strategies” that have long passed this market by.
Good luck, although I say that with tongue firmly planted in cheek.
On the other side of the equation: a $299,000 property that is worth FAR more than the asking price, but is under-priced for multiple offers.
I can’t give out the address, but everybody in my office was talking about it today.
This house, located in the east end, came out at $299,000, and we all thought it had to be a mistake.
But make no mistake, this is no $299,000 house.
Located on a busy street (but not a thoroughfare), this is a 3-bedroom, 2-bathroom property that isn’t in rough shape at all.
Yes, and it’s listed at $299,000.
“One dollar, Bob!”
May as well.
You may as well just list the property at one dollar, because a $450,000 house listed at $299,000 isn’t fooling anybody.
Do I disagree with the “strategy” on this property? A little bit.
I think the listing agent just looks silly, and maybe even a little lazy and inexperienced. It’s sort of like saying, “I don’t know if this is a $449,000 house, a $419,000 house, or a $399,000 house, so I’ll just list it at $299,000 and see what happens.”
As I said – it’s a time-tested technique. But I fear it might drive buyers away.
Would I get my clients involved in this situation? Probably not.
The $299,000 condo, that’s worth somewhere around $299,000 but has a hold-back on offers, is likely just a greedy seller who wants 110% of fair market value. That, we know.
But in the case of the $299,000 house, we know it’s worth more than asking; much more, in fact. So getting involved in this could lead to massive disappointment, and, if the seller/agent gets their way, something like 12-15 offers to deal with next week.
That’s not fun; not as a first-time-buyer. “Bidding” on a house against fourteen other people is never fun, and even when you “win,” you’re going to feel uncomfortable. Winning is great, but the “Did I just pay more than fourteen other qualified buyers?” line of thinking is going to be in your head for days.
We’re only a little more than one week into the 2013 market, and already we’re seeing some rather……interesting ideas.
But both of these situations are classic bait-and-switch scenarios, and it’s too early to tell if buyers are going to partake.
As we moved from spring of 2012, through summer, and into the fall, we felt that buyers no longer wanted to be taken advantage of, tricked, or put in the middle of a game.
Both of the situations above are games, and every game is bound to have winners and losers.
You can avoid being a loser by not playing at all, and that’s what so many of 2012’s buyers did.
Will that trend continue in 2012?
Let’s see if this condo sells, or if it’s re-listed higher in two weeks.
And let’s see just how many offers, and for how much, this east-end house sells for.
Then we’ll get a good sense of where 2013’s market is going…Back To Top Back To Comments
at 12:45 pm
Are you sure the house was listed at $299K and not $399K? I went to see one on Saturday exactly as you described (3 bed, 2 bath, busy street, east end), but it was $399K (still underpriced).
at 12:50 pm
@ Jean Guy
I saw the one you mentioned at $399K, but believe it or not, there’s yet another one listed on the same street at $299K. It just came out yesterday so it should be up on Realtor.ca today. One is closer to Queen, one is closer to Danforth. Seriously – $299K! It’s like offering a Mercedes for $15,000 and then jacking up the price when hoards of people come to look at it…
at 1:28 pm
I guess the seller/agent feels if everyone is trying to keep up with the “Jones'” then listing it low may make everyone sprint past them and overpay…
at 10:23 pm
at 12:59 pm
I’ve been finding that there are still sellers out there that want listing agents to hold back offers to “get them” a bidding war.
A hold back until the 24th? They’re nuts. I hope they get one, or better yet – no offers.
at 5:52 pm
I’ve been searching for a condo non-stop for the past several months and have seen this happen several times. And when it does, it makes me think the following about the listing agents:
1) They are idiots.
2) They think buyers are total morons.
3) I can’t trust them.
Fair enough when it’s a seller’s market, I get it that it’s their job to try and get as high a selling price as they can for their clients (coincidentally bumping up their commission).
But we are truly in a buyer’s market right now and crap like that will only do one thing. Make sure that the condo isn’t sold and that I won’t ever take that agent seriously again.
at 8:36 pm
“Fair enough when it’s a seller’s market, I get it that it’s their job to try and get as high a selling price as they can for their clients (coincidentally bumping up their commission).”
I think one can fairly conclusively show (and I think Freakonomics did at one point) that the agent is far better off making a deal and spending time working on a second one, than try to get a marginally higher price for a couple extra bucks commission. Diminishing returns and all that. Incidentally, they also showed agents’ own houses stayed on market longer and fetched a higher price vs comparables, than other people’s houses. This makes sense, because the agent’s own house sale will net him all the proceeds, not just the 5%, so it’s worth their time to market it longer.
at 9:44 am
Great point. It’s like business expenses. It’s nice to be able to expense things but in the long run, it’s cheaper to not have the expenses at all…
at 9:04 pm
I truly hope the bait and switch are reduced in 2013 and be more professional…and the Leafs win the cup…amen….
at 9:42 am
+1 for Leafs win the cup! 🙂
at 11:47 am
@ Sylvain W.
How about “Leafs come dead last and draft Seth Jones?” I think that’s a better plan of action.
Wait…..who hijacked this real estate thread and made it about an underachieving hockey team?
at 12:49 pm
He he. No more hockey talk. Promised.
at 11:11 pm
The “Keeping Up with the Joneses” home is listed as a private sale on Property Guys for $468,000. While it may not be in rough shape, it could easily cost $100k to bring it up to nice shape.
at 12:59 am
I am new to this arena, so I had to look up the term Bait and Switch. For anyone that is interested, I found a good definition here https://realestatemetro.com/real-estate-terms/bait-and-switch