No, not garbage  We covered that last week…

I mean listings, and specifically those that sit and rot on the market for month after month, with no hope in hell of selling.  They stink as soon as they come onto the market, and everybody seems to know except the sellers!

I’d like to examine WHY sellers end up listing at prices that are utterly insane, and then examine an even more important question why a Realtor would bother taking a listing so over-priced…

My colleague and I have a bet going about a $649K loft currently listed for sale.

The bet has two components to it; two bets:

1) The property won’t sell.  I don’t believe that this property will sell before Christmas (when our bet comes due), which will mark about 65 days on the market.

2) The property will not be reduced in price at all.  I don’t believe that this seller, in these circumstances (which I’ll explain later), will reduce the price.  I think this is a classic case of “going down with the ship.”

The bet is for $100, and if 1/2 of these components come true, it’s a wash.  But if I’m right on BOTH accounts, then it’s $200!

“Money, Money, Maaaaahnaay!”

The listing came out a couple weeks before Halloween, and when I saw it on MLS, I simply announced aloud to my colleagues, “This listing stinks.”

Simply put, the listing has something foul about it.  It’s not right, and it’s “fishy.”

It feels like it’s misplaced.

“Misplaced” is actually a good word, since this listing would be better suited for listing in 2015 if/when prices are substantially higher.  Or, perhaps it would be better suited to be listed on another planet, in another universe, where the listing prices is rational…

The listing price was $649,900, and I thought it stank for two reasons:

1) That was a ridiculous price per square foot.

2) I remember this listing from the Fall of 2011, and I know what the current seller paid for the unit.

And these two points lead into my question for all sellers of over-priced properties:

“Why are you listed at that price, and what do you hope to come of it?”

If you’re looking at an over-priced property, there are two great ways to determine just how over-priced it is, and both of those were noted above – the square footage, and the appreciation.

The loft listed at $649,900 is less than 1,000 square feet, which is just a ridiculous price for this building.

But more importantly, the current seller paid $515,000 for the unit less than two years ago, so do the math, and he’s looking for a 13.2% annual appreciation since he bought it.

That’s just insane.

I want to ask sellers like this, “What do you hope to come of this?  What are your expectations?”

The problem, of course, is that some sellers actually believe in the value!

Sometimes, a seller just picks a price out of nowhere, and says, “Nobody knows MY condo better than me.  This property is WORTH what I’m asking.”

But a more rational, logical person might say, “The condo market has increased about 3-4% per year over the last two years in that location, and yet you’re looking for 13.2%.”

How do you argue with that?

In my experience, you can’t.  These people are going to do what they’re going to do.

These listings stink, and they just rot on the market for months on end.

After thirty days, any normal seller would undoubtedly reduce the price.  Thirty days, in my mind, is the can’t-miss date for a price reduction, no matter what you have.  But when you see a listing that’s been on the market for 60 days with no price reduction, AND it’s massively over-priced, you know that the seller is a bit kooky, and that he or she is leaving this property to rot.

As luck would have it, the listing agent for the $649,900 loft called me for feedback when I showed it to a client (who was only using it to compare to another unit in the building), and I asked the agent, “Why is the seller asking for a 26.4% return in two years?”

The agent tried really hard to justify the price, saying “There’s nothing like this on the market,” and “This kind of property rarely comes available,” but that’s just lip-service.

I told him, “I’ll tell you what I think the property is worth, but just remember that you called me, okay?”

Then I told him if it were my listing, I’d have priced at $579,900, which is $70,000 less than his client is asking.

“Having said that, I think the condo is worth closer to $550,000, but in this market, for that type of property, any potential buyer is going to want to negotiate, so you have to leave a built-in buffer.”

That’s right – his listing is $100,000 over-priced.

But what’s $100K between friends?

Make no mistake, folks, this property WILL sit and rot on the market for another 22 days, and I’ll cash in on that $200 bet.

A listing like that stinks as soon as it hits the market, and very few active Realtors fail to recognize the stench.  If you’re worth your salt, you see that listing, and you know right away, “This one isn’t selling, in this market.”

So let’s look at things from the other perspective: that of the listing agent.  Why would a listing agent take a listing like this?

Well, there’s two reasons:

1) The listing agent hopes that the property magically sells to somebody that gets right off an airplane with a bag full of money and has no clue what the hell is going on in Toronto.

2) The listing agent hopes that a price reduction is on the horizon, and the property eventually sells.

The funny part about point #2 is that more often than not, the listing agent will get three months of an over-priced listing, and then the seller will terminate the listing, re-list with a NEW agent at a lower price, and then the property will sell.

Just after Labor Day when the fall market began, I received an email from a condo-owner who wanted to list his unit for $349,900.  The problem was that the unit was 480 square feet, with no parking and no locker.

That’s right, folks, this guy wanted $729/sqft.

Oh, and this wasn’t in Yorkville or anything.  In fact, it was in a building where the average price per square foot is probably $550/sqft, but WITH parking and locker.

I tried to reason with the gentleman, who I found out had paid $152,000 for the unit in pre-construction back in 2004, and asked him to simply take out a calculator, and punch 4-8-0 * 5-5-0 =, and then tell me what number came up on the screen.

He wanted to list this property for over 130% of it’s actual value, and I couldn’t understand why.

He told me, “You never know,” which I felt was somewhat lacking in theory, and even more so in practice.

And then he added, “I feel like if I list at this price, and eventually reduce my price, it’ll make it look like a steal.”

By that logic, why not list at a mere one-trillion dollars, and then one-million is easily attainable to anybody looking for a “great deal.”

I’ll be honest, folks, I respectfully declined to take the listing.  The guy was actually really nice, and we had a nice conversation on the phone when we finally spoke to try to hash out the price, but I just didn’t want to waste my time, or his.

The property was listed for $348,800, and sat and rotted on the market for 2 1/2 months before it was terminated, with no price reduction throughout the 75 day listing.

I have no idea why a Realtor would take that listing – at $348,800, for something worth $264,000 max, but potentially worth as low as $249,900.  It only helps to feed the disease that is over-pricing, and provide false hope to those that desperately need a reality check.

Right now in the downtown core (C01, C08), there are 163 listings for properties that have been on the market for 90 days or more, and that does NOT count the days on market for the previous listings, if some of these have been listed more than once.

There are 94 listings for properties that have been on the market 120 days or more.

There are 28 listings for properties that have been on the market for 182.5 days or more; that’s half a YEAR!

Folks, if your property is listed for a HALF YEAR, in this real estate climate, what the heck are you thinking?

Unless you’re selling an assignment of an Agreement, a unit in the occupancy phase of the construction process, or a hotel-condo unit, there’s no reason you shouldn’t be able to sell your condo in 30 days or less in this market.

These 163 listings that have been on the market for 90 days or more are just rotting, and stinking up the MLS system.  They may as well not even be listed, because buyers just aren’t looking at them.

I always assume that a “seller” wants to sell.

Maybe that’s my first problem…