Wikipiedia tells us: “To put ‘lipstick on a pig’ is a rhetorical expression, used to convey the message that making superficial or cosmetic changes is a futile attempt to disguise the true nature of a product.”
I can’t tell you how much I’m seeing of this in today’s Toronto real estate market…
When it comes to pricing a home, sellers and their listing agents will try over and over and over to fool the market, but I’m of the opinion that today’s buyers are just too savvy to fall for it.
Today, we’ll look at two homes as case studies: one condo, one house.
When I was a young child, I didn’t quite understand the expression, “Putting lipstick on a pig.”
First of all, pigs were cute! They always appeared in nursery rhymes, barnyard stories, and in movies like Babe.
Secondly, lipstick was used by pretty people! Like my mom, my teachers, and my grandmother…
And then, I grew up…
No matter how hard you try, some things just cannot be changed.
And while it is possible to manipulate prices in the real estate market, it’s impossible to fool people.
Case in point: the concept of under-pricing homes for multiple offers.
This is a way to “manipulate” the market, but you’re not really fooling anybody. The price paid for the home is one that might have been above predictable fair market value, but is still in line with value, and is a price that multiple parties would have paid, give or take, had they ALL had the option.
I was quoted in the Toronto Star article last week about a house that sold in the east end, artificially listed low at $649,900, that eventually sold with thirteen offers for $785,100.
When my clients and I first walked into this house, I said, “This is a seven-fifty to eight-hundred house, no doubt.” The fact that the home was listed at $649,900 didn’t faze us at all, since we’ve seen this countless times before.
Agree or disagree with the tactic of “under-listing” a home to try and push up the eventual sale price, that’s not what I wanted to talk about today. That’s an old tactic, that most buyers are fully aware of, and begrudgingly accepting of.
What I wanted to talk about today was the exact opposite.
What I wanted to talk about today, is putting lipstick on a pig.
That house I referenced above, listed at $649,900, took ONE shot at the market, and the result was great for the sellers. But what if they had taken the opposite approach? What if they had listed at $929,000, and let it sit on the market for 90 days? What if then, they re-listed at $899,000, then at $849,000, then six months later, listed for $799,000, and finally, five months later, listed at $599,000 with a hold-back on offers?
What would have happened?
This is what I mean by putting lipstick on a pig.
It’s the same pig as it always was, but now it’s just attractive.
At $599,000, that house would be ridiculously under-priced, but everybody would know it – based on the track record.
This is NOT the method most sellers take. The successful sellers will list ONCE, under-listed or not, and sell their house for top dollar.
The lipstick-on-a-pig “strategy” is anything but…
There’s a condo that hit the market today; a “new” listing, if you will.
If you’ve read my blog long enough, you know I can’t give out the addresses of properties that I critique, but I will say that this is a property I’ve featured in a Pick5 video before.
When the property first came out, at $585,000, I commented that this was a LOT of money for a unit like this. I loved the unit, loved the building, and loved the style – but I commented on the price, and as subsequent events would demonstrate, the price was in fact, high.
This unit was eventually re-listed for sale at $564,900, and then reduced to $539,800.
The unit has been on the market, at various prices between $585,000 and $539,800, for well over two months.
Today, the property was re-listed for $485,000, but with a hold-back on offers until December 17th.
What the hell?
I don’t understand the “strategy” here, folks.
The listing agent and the seller seem to live in a dream world, where everybody has the memory of a goldfish.
Who in their right mind will look at this listing and say, “Wow, $485,000? Great price! I see they’re holding back offers, so I have no problem jumping into a multiple offer situation on this property!”
That’s what the sellers are counting on – make no mistake.
Rather than take the next logical step, and re-list the property at $519,000 – a reasonable reduction from their $539,800 price, the sellers are getting impatient, and have decided to try and fool the market.
They’re hoping that by “listing low,” they’ll take a patented page from the real estate playbook, and produce multiple offers, and a sale price well over asking.
There’s only one problem with this: the market has already seen this pig before, sans lipstick.
We all have access to the same information, and we know the history of this property. It was listed for $585,000, $564,900, and $539,800. We know the sellers are looking for something in this range, so the $485,000 price and hold-back on offers is just ridiculous.
I’ll tell you how this is going to play out: there will be 1-2 offers on “offer night,” and maybe somebody will offer $5K over asking. The listing agent will provide my favorite line, “Are you aware this property is priced for multiple offers?” and the property will be taken off the market, and re-listed in January.
You can’t fool the market like this. It’s just not reasonable to assume so.
That’s a condo, you say, and there aren’t usually multiple offers on condos. So what about a house?
Let’s look at a midtown home, which came onto the market on Monday, at $1,379,000, with a hold-back on offers until December 12th.
Now, let me show you the history of this home:
Listed for sale 10/1/2012 at $1,699,000, on the market 28 days.
Listed for sale 10/29/2012 at $1,599,000, on the market 112 days.
Listed for sale 2/20/2013 at $1,499,000, on the market 77 days.
Listed for sale 5/8/2013 at $1,469,000, on the market 63 days.
Listed for sale 7/10/2013 at $1,399,000, on the market 28 days.
Listed for sale 8/7/2013 at $1,349,000, on the market 17 days.
And now they’re on the market for $1,379,000 with a hold-back on offers?
Who the HELL would get involved in this mess?
A hold-back on offers, especially one that says something like, “Offers reviewed on December 12th at 7pm, please register by 6pm,” is clearly expecting multiple offers.
Are these sellers in any way interested in an offer for $1,379,000 with three conditions?
Or is this their “strategy” to try and jack up the price to $1,450,000?
What do we make of the fact that this home was on the market in August for LESS than the current asking price, and it didn’t sell? Or was that price actually ever real?
Putting a property on the market over, and over, and over, and then finally “under-listing” and holding back offers is just putting lipstick on a pig.
And in today’s market, savvy buyers can smell that pig a mile away.
All it takes is twelve seconds of effort by any Realtor to run a history of the property on MLS, and you’ll see exactly what kind of game the seller is playing.
I just don’t understand what these sellers and their listing agents are thinking.
They can’t travel back in time to stop themselves from listing at an inflated price to begin with, so now they decide to implement the strategy they should have had in the first place?
It’s too late.
You get ONE chance to sell real estate for top dollar in this city, and ONE chance to make a first impression.
After you’ve come onto the market 5-6 times, at various prices, or with multiple listing brokerages – the market knows you’re a bit kooky. And now, you’re trying to incorporate a “strategy” that only works the first time you list your property for sale.
You can’t fool the market, folks.
I don’t think either of these properties is going to sell, nor should they.
Just lipstick on a pig, yet again, in the Toronto market…