Virtually every house listed for sale in Torontos’ central core these days comes with a designated offer date, or you could say that the listing has a “hold back” on offers.

What used to be a standard six or seven day hold-back is now anybody’s guess.

I’m not sure if it’s a “strategy” for some listing agents to buck the trend, or if it’s complete ignorance, but I’ve seen some crazy offer dates in the past few weeks, and it deserves a discussion…

My question is: how long?

My question is not: why?

Sometimes, people either frustrated with the real estate market, out of touch with it, or both, will ask “why does every listing have a hold-back on offers?”

It’s a simple answer, isn’t it?

Do we really need to ask why?

Isn’t it rhetorical?

Like I said – asking “why” has to be based on ignorance, or frustration, since the answer is obvious: we’re in a red-hot real estate market, and this is the best way to maximize the sale price for a home.

A newspaper reporter asked me a couple weeks ago, “Why do they have to do this?”

She was frustrated by the listing of a house on Wolfrey in Riverdale, which was listed for $429K, and sold for well in excess of $500,000.  The house represented “entry level” for many buyers, but in the end, it proved to be anything but.

Buyers who thought they could never buy a house for $400,000 were looking at this home – priced at $429,900, and hoping, wishing, dreaming…..and waiting.

There is no “hope” in real estate, but that doesn’t stop somebody from submitting an offer for $400,000, on a house listed at $429,900, with a hold-back on offers, that eventually sells for $507K.

“Why” we hold-back offers shouldn’t be a question.

Some people label the practice of pricing at $429,900, when the house is worth far more than that, “unfair.”  But consider that any house listed for sale in Toronto with an “offer date” essentially has a starting bid, not unlike Ebay, and that starting bid doesn’t reflect reality.

You don’t go on Ebay looking at a purse listed at $0.01, when it’s worth $800, thinking, “I bet I can get that purse for $0.01!”

In real estate, we can’t list a house for sale for $1.00, and expect people to find it.  Buyers looking at $600,000 houses in a given area will search between $500,000 – $700,000, or according to some other parameters.  They will NEVER look for houses priced at $1.00, and this is why we listing agents don’t price houses as such.

You can say that it’s “unfair” to price a $750,000 house at $679,900, and then “hold back” offers, but that $679,900 price is a starting price.  Sure, we could have listed at $1.00, just like the purse on Ebay, but nobody will see the listing at $1.00.

Make sense?

So with the “why” out of the way, let’s move on to what I really wanted to talk about today: how long?

How long do you hold back offers in today’s market?

You’re reading this on Monday, February 10th, 2014.  Say a listing comes out onto the market today, for a 3-bed, 3-bath, semi-detached house on Montgomery Avenue in the Yonge/Eglinton neighbourhood, for $879,900.  When do you think the sellers will review offers?

I’d hazard a guess that if it’s not Monday, February 17th, 2014, it would be Tuesday, February 18th.

Most offer dates are about 6-8 days after the listing comes out, and this is not some sort of coincidence.

It’s a time-tested technique, that leaves just enough time for the market to respond to the listing, and yet put the pressure on the buyer to move quickly.

Then again, “quickly” could mean something entirely different from one buyer to the next.

In today’s fast-paced market, to suggest that making a decision in seven days is “quick” might seem like a farce to some buyers.  Today’s buyer often gets a new listing emailed to him or her the very day it comes out, and then goes to see it that evening.  That buyer might say, “Okay, we’re interested” that same evening, and thus “quick” could mean only eight hours after the listing hits the market.

Waiting around for a full week can seem like slow torture to many eager buyers, but that’s just the way things work in today’s industry.

If the seller of a home, listed on Monday, February 10th, were to review offers on Thursday, February 13th, that would likely be far too quick, and wouldn’t allow for the property to be properly exposed to the market and its buyers.

Typically, you want to allow for a full weekend to pass, thus exposing the home via the public open house, and giving buyers six or seven weeknights to make an appointment to see the home, as well as go back for a second viewing, perhaps with a home inspector, family member, etc.

But what about the alternative?

We’re talking about a scenario when offers are reviewed to quickly, but what about when offers are held-back for too long?

I was in a 5-plex in the west end last weekend, where the offer date was fifteen days after the listing hit the market.

Investment properties are an entirely different animal, so perhaps the comparison isn’t fair.  Here was a case of the seller and listing agent wanting to reap the possible rewards of multiple bidders coming to the table at the same time, just like with residential properties, but also wanting to expose the property to the market for a much longer duration.

Residential properties are often bought with emotion, and buyers are antsy, eager, and looking at listings each and every day.  Investment properties and commercial properties are bought strictly based on numbers and finances, and not every potential buyer is “in the market” when that listing hits the market.

I think it’s fair to say that a fifteen day hold-back on offers would be nuts for a single-family home, but might make sense for a 5-plex.

So then…..what do you make of this listing:

Sorry for all the black-outs, but you know the rules I have to abide by…

Here we have a listing, which came out on February 7th, 2014.

And as you can see in the broker’s notes – they’re reviewing offers on March 4th, 2014.

So I have a question: what planet do you think this listing agent lives on?

You’re probably thinking “Mars,” but that’s because Mars is the most common planet that comes to people’s minds. I don’t know if it’s due to the famous book by John Gray, “Men are from Mars, women are from Venus,” or if it’s the Red Hot Chili Peppers’ Stadium Arcadium album, that featured discs called “Mars” and “Venus.”

In any event, the listing agent from this property is not from planet earth, and is likely new to the business, has no clue what he or she is doing, or both.

Selling real estate is sooooo easy, right?

Yep – just list that property – that simple, standard condo (with no photos on MLS, and restrictions on showings due to the tenant), on February 7th, and then hold an “auction” on March 4th.

There are three things you’ll need on March 4th:

1) Security Guards – to hold back the crowds of people, and screaming fans.
2) Dump Truck – to haul away all the money you’ll be getting for that sought-after property
3) Champagne – to raise a toast to the genius decision to hold back offers on a condo for twenty-five days.

I would estimate that in today’s market, about 98% of condominium listings do NOT have a hold-back on offers.  The only listings that do are either really, really special properties, or properties listed by people from other planets.

Holding back offers on a condo is one thing, but holding back offers for twenty five days is just stupid.

Why, you ask?

Well, too long a hold-back causes three issues:

1) Fear of “Games.”  Today’s buyers are very savvy, and often have bid on several other houses before.  They know the market, they know the system, and because of how hot and often how frustrating the market can be, they’re always on the lookout for red flags.  If a ‘normal’ house came onto the market with a twenty-five day hold-back on offers, most buyers would smell something foul, and question the listing, if not disregard it altogether.

2) Cooling off.  Much of Toronto’s real estate is bought with emotion, and while I wouldn’t want to use the world “impulse,” I would say that many buyers might act differently if a property was on the market for 75 days, and they had ample time to think things through.  By leaving too much time in between the listing and the offer date, a seller risks that the buyer pool might cool off, as the initial excitement fades.

3) Other options.  Let’s face it – an active buyer is on high-alert at all times, and probably checks MLS several times per day.  Finding your “dream home” on Wednesday, and being forced to wait until next Monday to submit an offer, certainly leaves the door open to change your mind, or find another property you like more.  But if you TRIPLE that window in between the listing and offers, you simply triple the chance that a buyer will find other options.  And with a buyer being frustrated by the long hold-back, they might be looking for any reason to look at a different property regardless.

None of us really “like” the system we have in place, with listing properties, and holding-back offers.  But it’s what we have, and it’s what we’re going to continue using.

If you’re a frustrated buyer, just put the shoe on the other foot, and tell me for one second that you wouldn’t hold-back offers if YOU were a seller in today’s market.

We essentially have an auction system, that isn’t perfect.

But it is what it is, and as I tell any new client that calls or emails, looking to get into an entry-level Toronto house, “You’d be naive to think you won’t be in competition for a home at some point.”

Who knows; maybe the twenty-five day hold-back will scare off buyers, and the property won’t receive the attention it would have, could have, or should have.

Then again, that seller likely knows best, and I’m sure he or she would re-list……$30K higher…