I’ve talked about this many times before, and often called it “the real estate kiss of death.”

There are many reasons for re-listing a property at a higher price, but none of them are good ones.

Here are a couple of stories from the past week…

Last weekend, a client of mine was out looking at open houses, and sent me a text message saying that she would pop into houses A, B, and C.

I wrote her back and said “A and B are great – but skip C – the seller is insane.”

The seller is insane.

I’ve been saying this a lot lately, and with increasing frequency.

There are different reasons why people list their properties for sale, and it’s not always the obvious reason – because they want to sell.

They might think that they want to sell, but if a seller lists his or her property at 120% of fair market value, then they don’t really want to sell.

In this case, “Property C” was one I had written about on my blog last month – where we offered slightly under the asking price for a property that had been sitting on the market, and the seller signed back at about $40,000 OVER the listing price.

The seller was insane.  You’d kinda have to be in order to do something so illogical.

In today’s market for houses and condos, there are several properties I know of that I tell my buyers they can “skip over.”

And anything where you’ve seen a price INCREASE falls exactly into that category.

Case in point, a house was listed near Islington Avenue a few weeks back, priced at $599,000.

They set an offer date, which could only indicate that they expected multiple offers, whether warranted or not.

I went in with my clients and we didn’t feel like there was $599,000 worth of value in that house, let alone more.

My clients’ parents came in as well, and they agreed with our assessment.  That made five of us that felt this house was over-priced.

The offer date came and went, and the house didn’t sell.

The listing agent told me ahead of time that she “expected at least a few offers,” and pointed me towards some comparable sales for similar properties that had been priced at $599,000 and promptly sold for $625,000 – $635,000.

A week after the offer date passed, we went back to take another look at the property, thinking that perhaps there was some value in the home at $575,000.

We went over the home with a fine tooth comb, and decided that we weren’t sure and we’d put our plans on hold.  We might come back to it in a couple weeks, but we weren’t sure.

The very next day, something happened that cleared any and all doubts from our minds.

They raised the price.

Really?

So a house that hasn’t sold at $599,000 underwent a price INCREASE?

Yes, indeed.

The house was re-listed at $620,000, and I called the listing agent to (respectfully) ask what the hell was going on.

She told me, “Well, we were sick and tired of hearing numbers in the $570’s so we raised the price!”

That made no sense to me.

So, instead of hearing numbers in the $570’s, now you’ll hear…….nothing(?)

Or do they think that raising the price to $620,000 will suddenly net them offers in the $590’s?

By that logic, why not raise the price to one-billion-dollars so that you can get offers in the high-millions?

I’ve long maintained, “Just because a house is listed for a given price doesn’t mean it’s worth it.”

Or better said, as one of my readers posted two weeks ago, “You’re confusing PRICE with VALUE.”

The listing agent gave me a long-winded speech about all the “comparables” in the area, and cited a house that she had sold back in September of 2010, but I failed to realize how seven-month-old sales had anything to do with the house in question.

“The market told you that your listing is not worth $599,000, and yet you raised the price!”

She said, “My clients aren’t going to GIVE it away,” and I realized that the conversation was pointless, if it ever had any point to begin with.

If you think that selling your $598,000 house for $579,000 after three weeks on the market is “giving it away,” then you don’t understand market conditions.  Maybe you’ll do better, maybe you won’t.  But that’s hardly “giving it away.”

She said she had received a couple of “lowball” offers, both verbal, and I reaffirmed that an offer looks like a lowball when the listing is over-priced!  It looks even worse once that price is raised…

At $620,000, this house will sit on the market for as long as it takes for either: a) a price drop, b) a termination of the listing.  But the crazy part is – the listing agent says her clients “need” to sell!

Then there was the case of loft in Leslieville that came out at $399,000 two weeks ago.

It was a great property and showed exceptionally well, and my clients were interested in dipping a toe in the water just to see what the temperature was like.

I told them that it might sell for upwards of $425,000, and it might not.

Some of the comparable sales were pointing to value of over $400,000, but you never really know how these things are going to play out.

My clients were on the fence, but I kept track of the progress (or lack thereof) on “offer day,” and as luck would have it, there were NO offers.

I thought this represented a decent opportunity, so I called my buyers and asked them if they wanted to view the property again.

We booked an appointment for the next day, but before we could enter the property, the price changed – from $399,000 to $425,000!

It looked like sour grapes to me!

If you wanted $425,000 for your condo, then you should have listed it at $425,000 the first time around!

Listing at $399,000, which you perceive as “under” listing, will only net you $425,000 if the market deems the property worthy.  If the market responds favourably, then you might receive the three offers needed to net you $425,000.  But if you don’t get any offers, then the market is telling you that your property is accurately priced, at best.

One of two situations could have happened here:

1) The sellers received no offers.
2) The sellers received one offer or more, and turned it/them down in order to re-list higher.

Re-listing higher is “the real estate kiss of death.”  It sends a signal to all buyers and agents that you refuse to acknowledge market value, you are playing pricing games, and maybe, just maybe, you’re insane.

Imagine if there were two offers on this Leslieville loft – one for $405,000, and one for $411,500.

So the seller says to his listing agent, “Forget that!  I want $425,000, or I’m not selling.”

The listing agent then swallows his pride, goes back to the two buyers, and says, “My client wants $425,000.”

Then the two buyers walk.

Is there any other option?

If you made a $411,500 offer on a property listed at $399,000, with one other competing offer, and the seller and listing agent came back and said, “Thanks so much for your offer, but our $399,000 price was deliberately misleading and we actually want $425,000,” would you stay and play the game?

Nope.

So then the seller re-lists the next day, and that “PC” for “price change” is displayed on the MLS listing and every agent knows that the seller is playing games and the property likely isn’t worth pursuing.

If it were possible to put a red flag on MLS next to a listing, you could almost accomplish that by using the “PC” when you have increased the price.  A wily old dog like me sees nothing but red…

I have a feeling that many sellers are being (mis)guided by their friends, family, co-workers, and the barista at the local Starbucks.  These people tell them, with a knowledge base of zero, things like, “Oh the market is so red-hot right now you’d be crazy to let your (house/condo) go for less than (insane number) and anything less than (2? 3? 10?) offers won’t get you what your house is worth.”

What results, is a seller coming back from the cottage after a weekend of brainwashing and deciding that her $520,000 house, that has been on the market for 14 days with no offers and limited showings, is suddenly worth $550,000.

Houses that sit unsold on the market do so for a reason; or five.

But part of me realizes that despite having just explained this in great detail, I’ll probably write the exact same post in July.  And October.  And January…