That’s what I ask a buyer-client of mine when they express interest in a property that’s mired in the ever-popular “pricing-game carousel.”
No, it’s not just a simple pricing-game. That would be much simpler.
It’s a damn carousel, that goes around and around, and nobody knows when it’s going to stop. The buyers don’t know, the seller doesn’t know, and sometimes, the listing agent him or herself has no clue – and that’s the saddest part.
Like many carousels, this one makes you want to puke after even a very short ride…
“Do you really want to get involved with that?”
I don’t ask the question very often, because to be quite honest, my clients are usually a lot savvier and more informed.
But sometimes buyers get desperate, or start to do that thing that you simply can’t do in real estate: hope.
It’s nice to have hope in some areas of life.
But in the red-hot Toronto real estate market, hope gets you nowhere but left behind.
“We just hope our offer will win,” says the naive buyer offering $10K over asking on a $699,000 listing, before it sells for $852,000.
“We hope the seller will want to work with us,” says the uninformed buyer as they submit an offer of $300,000 on a $369,900 listing, when all the while, their inexperienced buyer-agent sits idly by and let’s them go ahead.
“Hope” doesn’t work in this market.
And when you see a property that’s sitting in between an elephant and a horse on a carousel, you can almost guarantee your hope will get you nowhere.
I’ll give you an example of a pricing game.
I’ve blacked out the building, and the unit number, but you get the gist of it.
This unit was first listed way back in January of this year, if you can believe it!
What’s curious to me is that it was first listed on January 4th, apparently for 52 days, but was re-listed on February 22nd – which is less than 52 days, by my count!
That means either by clerical error or on purpose – this unit was on MLS twice.
In any event, the unit has basically been on the market since January 4th, and never sold.
It came out at $289,900, and again at the same price. Then it was re-listed at $279,900, and again once more at $269,900.
The unit never sold, as you can tell from the above.
But when it came time to re-list, re-strategize, and re-group, rather than bringing the unit out at $259,900, which is probably the unit’s true value, the seller, listing agent, or both, decided to list at $229,900, and “hold back offers.”
I wrote a blog post last year that told a similar story. Hold on, let me dig that up….
HERE: “Only A Complete Fool Would Fall For That” from October 10th, 2014.
I was shocked and dismayed (as were some of the readers who commented…) to see the so-called “strategy” of under-listing a property and holding back offers, actually work.
So in the case of this Liberty Village condo, listed at $229,900 with a “hold back” on offers until next week, I ask the question again:
“Do you really want to get involved with that?”
I’d buy it for $229,900. I think we all would, right?
But it’s not available for $229,900, it’s just priced as such because of the ridiculous way in which we sell Toronto real estate.
So at what price is the property available?
That’s the million-dollar question!
Actually, that’s being a bit generous. “That’s the two-hundred-thousand-dollar question.”
There. That’s a little more accurate…
Let’s just say that this property is available somewhere between $229,900 and $269,900, but I’m going to suggest somewhere near the latter number.
So again, I ask: do you really want to get involved with that?
I wouldn’t. Not as a buyer, and not as a buyer’s agent. It’s a mess just waiting to happen.
The pattern is usually the same from the get-go: a seller over-values and/or over-values his or her house, then slowly reduces in price, but never all the way down to fair market value, and then after being on the market about five times as long as anything remotely reasonable, that seller employs a stupid “strategy” that is doomed from the start.
And quite often, the seller kicks a gift-horse in the mouth.
Let me tell you a second story, and I’m going to very vague about this one, and apologize in advance to my industry colleague who will know right away that this story is about he or she: I’m sorry, but based on what happened with your listing, you KNOW it’s a perfect fit for this blog post.
A property came onto the market back in July, listed for $898,000, with a hold-back on offers.
The property woulda, coulda, shoulda sold for more, but realistically-speaking, in one of the hottest residential “family areas” in the city of Toronto, a property is going to sell if it’s priced correctly.
The property didn’t sell on offer night, and it was reduced to $848,000.
It continued to gather dust on the market until after a whopping 36 days, which is a short eternity for this particular neighbourhood, the listing was terminated.
And the next day, it came back onto the market at $649,900.
As was the case with the $229,000 condo detailed above, this house was NOT available at $649,900.
But that was the “enticing” list price, and the seller and the listing agent decided to employ this “strategy.”
I talked to the listing agent, and said as honestly as I could that the strategy wasn’t going to work. But he/she told me, “I didn’t want to; it wasn’t my idea. But the sellers want to give it a shot.”
I suppose that’s fair. But then again, maybe it’s not.
In the case of the Liberty Village condo above, that property is listed by a very experienced, very well-known agent in that neighbourhood, and I’m surprised that the agent deployed that kind of “strategy.”
Is it our obligation to do whatever the client says, even if it’s stupid and not going to work? Or is our value to say, “That’s stupid, and it’s never going to work,” thereby risking losing the business, but telling the truth and giving the client what they’re paying for?
I think you all know where I stand on that one.
So the $848,000 house came out at $649,000, and I thought the whole thing was downright silly. I did have one client ask about it, but I asked her, “Do you really want to get involved with that?”
She told me she would pay $750,000 for the house, but asked me what I thought the sellers were looking for.
I told her: $848,000.
“Then why would they list it $200,000 lower? What are they expecting? Who is actually going to pay that much over asking for a house when they know what’s actually going on?”
I told her, “That’s the point – perhaps the entire buyer pool doesn’t know what’s going on. And maybe that’s what the seller is counting on.”
The end of this story is a sad one, for two reasons. But let me get to the reasons after the ending…
The house ended up getting several offers, and two of them were over $800K, but the seller didn’t accept an offer, and the house was taken off the market.
The two reasons this was sad:
1) Two buyers were stupid enough to offer over $800K for a house listed at $649,000 when they never made an offer of over $800K when it was listed at $848,000 a few days earlier.
2) The seller didn’t take $800K++ which is absolutely ridiculous.
In an efficient market, a property sells for at least fair market value, does it not?
So after all this back-and-forth, and this ridiculous pricing game carousel, I can’t believe the seller didn’t pull the trigger.
Re-list at $898,000 again?
Does the seller think that a buyer will pay $850,000 and figure they got it for $50,000 under asking? By that logic, why not list it at $1,000,000, and somebody paying $900,000 will get the house for ONE HUNDRED THOUSAND DOLLARS UNDER ASKING!
The seller’s actions were pretty crazy here, but I think the buyers who got involved with this mess were equally as guilty.
To my colleague who is reading this – you did your job, no doubt about it. You got people to come to the table, and you got the price up pretty high. You almost closed it for your sellers, so kudos for you.
But those buyers who got involved with this are nuts, and perhaps they had over-eager buyer-agents pushing them and encouraging them to make that $700,000 offer – fifty thousand dollars over asking.
The buyers should have known all along that the seller wanted $850,000.
BECAUSE THE GODDAM HOUSE WAS JUST LISTED AT THAT PRICE!
It’s like a window into the future, except it’s in the past. Hey – that’s kinda neat, huh?
You want to predict the future, in terms of what the seller is willing to accept for the property on offer night. And in order to obtain this coveted piece of information, you look back at what the house was listed at before.
What a ride.
I haven’t been on a carousel since the late 1980’s at the C.N.E.
And in my line of work, I try desperately to avoid getting on the pricing game carousels, because believe me – they’re all over the place…
at 11:54 am
With all of the references to “hope”, I thought for sure that you would reference The Shawshank Redemption. ha!
Here’s hoping whoever buys these two properties doesn’t pay more than the $269,000 or $850,000, respectively. In the column from October 2014, the buyers went well over the asking price. As I wrote at the time, the buyers should seek recourse from their agent for spending way more money than necessary.
at 1:57 pm
Shawshank still scares me to this day. Makes me wonder how I would fare in prison.
at 1:42 pm
1 scott a unit on the 14th floor last year. was bully offered to 18% higher
at 1:07 pm
The unit in Liberty Village got two offers, both were rejected, and they’ll bring it back out at $269,900.
Why did those two people bother submitting offers? I don’t understand…
at 2:22 pm
thanks for the update! It’s interesting to follow along.
at 12:24 pm
In my building, unit listed for 415… does not sell. Listed at 400. Does not sell. Listed at 370. Sells. Selling price? 408