Put on your thinking caps, will you?
Let’s say that, for whatever reason, you will be a seller in the month of June.
Your target list date is Tuesday, June 2nd.
You own a 1-bedroom, 1-bathroom condo in the Entertainment District that is worth somewhere around $600,000. The last sale for your model was back in February. It was four floors higher, but your condo is nicer, you think. That property was listed at $549,900 and sold for $612,500.
How are you going to price your condo for sale?
Let’s say I give you three options:
1) List at $499,900 with a holdback on offers until Monday, June 8th.
2) List at $599,900 with a 24-hour irrevocable on all offers, no exceptions.
3) List at $614,900 with offers any time.
Does anybody want to help me here?
There’s more to this blog, I assure you. And the readers will comment on a litany of topics today as they always do. But for now, can ya’ll put this to a vote in the comments section below? I’d really, really like to know where your heads are at.
Let me look at the three scenarios and provide pros and cons.
Scenario #1: List at $499,900 with a holdback on offers until Monday, June 8th.
Pro: You have under-priced substantially and should get a ton of interest.
Pro: You have opened the door to a pre-emptive or “bully” offer.
Pro: You can always re-list at a higher price later if this strategy blows up in your face.
Con: Showings are down substantially from February and March, so you won’t get the same level of interest.
Con: We’re in a pandemic. Period.
Scenario #2: List at $599,900 with a 24-hour irrevocable on all offers, no exceptions.
Pro: You are essentially priced at fair market value, considering the latest comparable sale.
Pro: With the 24-hour holdback, you will be able to see if you get any further interest, after an offer comes in.
Con: You haven’t priced the property to get more interest than it’s worth.
Scenario #3: List at $614,900 with offers any time.
Pro: Anybody who comes to see the property is likely in tune with market value, as opposed to the buyers who might see the property if it were listed at $499,900, who have a $499,900 budget.
Pro: You have wiggle room on the price, and can allow a built-in negotiating cushion for any buyer who doesn’t want to pay sticker price, ie. you hand them a “win.”
Con: You limit your upside.
Con: Fewer showings
I could make an argument in favour of any of these strategies, and in the end, my opinion would change depending on what day it is.
Before I had the idea for this blog post, last Friday, I’ve had been completely in favour of option #3 or maybe a hybrid between #2 and #3, which is to say that if I can accurately convey to the seller that they should not expect to get February’s price, then they should consider the “offers any time” strategy.
By Tuesday afternoon, however, I started to waver on this.
So many condos that came out on Monday and Tuesday had “holdbacks” on offers, or at least it felt that way.
Maybe I was only looking at the lower-end condos, or maybe since I was really only looking at the listings that piqued my interest, ie. the good ones, I was just looking at listings that had holdbacks!
So I sat down to look at the data and try to understand where pricing and strategy has gone in the downtown condo market.
If we took all of the condo listings in C01 and C08, starting last Monday (albeit a holiday) and running through Tuesday (I’m typing this at 11:30pm when all the day’s listings are accounted for), how would the data look?
Specifically, we’re looking for three different strategies:
1) A specific offer night.
2) Offers any time with 24 hours.
3) Offers any time.
Now to be fair, #2 could be strategic in nature, as I wrote in my blog last week. The listing agent could be pricing attractively without an “offer date,” and expecting multiple offers in the first 24 hours. Or, he or she could just be dealing with an out-of-town seller, thus they need the 24 hours. Either way, we’ve included this as a category.
Here’s how the data breaks down:
As you can see, out of 266 listings, a mere 44 are holding back offers.
That’s only 17%.
Doesn’t that seem low to you?
Wasn’t there seemingly a time when every condo listing had an “offer night?”
Consider that 12% of the listings are using the “24 hour irrevocable” strategy, and while I did see one power of sale in here which tells me it’s not a “strategy” per se, but rather it’s done out of necessity, I did see a lot of under-priced listings that are using this strategically. Some of them sold over asking too, so the strategy worked.
As for the tested and true “offers any time” without restriction, a whopping 71% of these listings fit the bill.
But what if we adjusted for price?
Surely the $3,495,000 penthouses can’t be expected to “price low and hold back offers,” can they?
So let’s look at the segment of the market which has always been the hottest: sub-$700,000.
We’ll re-run the same chart, and it shows the following:
This time around 34 listings out of 134 are holding back offers, or 25%.
That’s higher than the 17% that the overall market shows, although to be fair, the overall market does include these listings here:
Ah, right! Perhaps I could have started with this, but I did want to paint the overall picture first.
Now we can compare the percentage of condos with “offer nights” as follows:
Under $700,000: 25%
Over $700,000: 8%
As for listings with “offers any time” and zero restrictions, it shows as follows:
Under $700,000: 57%
Over $700,000: 86%
So let’s start from the beginning, shall we?
Let’s say that you’re putting your home up for sale on Tuesday, June 2nd, only this time, you own a 3-bedroom, 2-bathroom semi-detached house in Bloor West Village, or The Junction, Or Danforth Village, or Upper Beaches.
Let’s say that your house is “worth” somewhere around $1,200,000.
1) List at $999,000 with a holdback on offers until Monday, June 8th.
2) List at $1,149,000 with a 24-hour irrevocable on all offers, no exceptions.
3) List at $1,229,000 with offers any time.
Humour me, and provide your answers below, would you?
Having seen the statistics above for how downtown condominiums are being listed, how do you think the data would look if we re-ran the same charts, but this time for, say, freehold listings in E01, E02, E03?
Would you expect to see more holdbacks on offers, or less?
What percentages would you have in mind?
A mere XX% of all downtown condo listings had “offer dates,” and under $700,000, still only XX% used that strategy.
For freehold houses, are you thinking higher or lower?
Take a moment and make your mental guess before I show you the following…
Wow, what a difference!
A whopping 60% of listings have an “offer night,” and further 19% have the “24-hour irrevocable” strategy which I think is far more likely to be a strategy, as opposed to a seller really being in Thailand without access to email, than it would be with downtown condos.
Only 21% of these listings have “offers any time” with zero restrictions.
Once again, let’s finesse the data a little and take a look at those listings below $1,000,000, which is the hot-spot in the market, especially for first-time buyers:
Oh, okay. This tells quite a story about where the entry-level freehold market is!
It’s a similar pattern to what we saw with condos, except these percentages are way, way higher.
Nevertheless, it’s interesting to see 81% of listings with “offer nights,” and a mere 10% with “offers any time.” To be honest, I’m surprised to see any listings with “offers any time” in this price point, but there’s always that one dilapidated house listed at fiar market value, or that re-list, perhaps.
Last, but not least, let me filter out the properties listed over $1,000,000 so we can compare appropriately:
This is precisely what I expected.
The percentage of “offer nights” for the listings in each of these two categories is as follows:
Under $1,000,000: 81%
Over $1,000,000: 49%
I think back to the dregs of early-April when some of the TRB readers were commenting about how if prices drop to, A, B, or C levels, all of which were utterly ridiculous, they would consider getting into the market.
I understand that we are not out of the pandemic, and that a second wave could come, or a recession could hit in 6-12 months, or the United States could face a civil war when Joe Biden wins the Presidency in November, Donald Trump refuses to leave the White House, and a hoard of redneck militia surrounds the White House while the Metro Police, State Police, ATF, and FBI are given different orders by different government officials. Wouldn’t that be something…
But looking at how properties are being listed, and more specifically (topic for another day?) how they’re selling, I think it’s fair to say, er, conclude, that the Toronto real estate market is functioning as a seller’s market right now for freehold properties, and maybe, just maybe, a balanced market (seller-leaning) for condos.