Stop me if you’ve heard this bit before, but have you ever considered why a “placebo” is effective?

A placebo is a fake treatment for sickness, illness, or other ailment whereby a pill is given to the affected individual, however, that pill is not medicinal.  It’s sugar or saline and it’s designed to look like a real pill.

Sometimes, these are used in medical research to measure the effectiveness of an actual drug versus no treatment at all.  The participants in the study are randomly selected to receive the real drug or the placebo, but none of them know which it is.

Other times, a doctor can prescribe a placebo in place of an actual treatment, whereby the patient’s condition might improve because the belief that he or she is receiving treatment is enough to make them better.

Hence, “the placebo effect.”

But what would happen in the above case if a doctor told the patient, “I’m prescribing you a placebo”?

It wouldn’t work.

Right?

The whole point of a placebo is that the patient thinks it’s real.  If the doctor tells them it’s not real, then their body or mind won’t respond as though it is.

For years, I have always been fascinated by listing agents and sellers who will take property, for example, priced at $1,000,000 but sitting on the market for three months, then list it for $699,900 with an offer date.

The buyer pool already knows the property was listed for $1,000,000, and/or that the seller wants or expects this amount.

Listing at $699,900 with an offer date isn’t going to have the intended effect of making the buyer think the property is a deal or undervalued.  Perhaps more importantly, listing at $699,900 with an offer date is not going to make the buyer ask, “I wonder what the seller wants?”

Because the buyer already knows!  The seller has already listed the property at a higher price!

In a red-hot market, I still loathe this technique.

But in the market that we’re currently in, especially with respect to condominiums, it makes absolutely no sense to me.

Check out this listing:

Alright, so it’s a 1-bed, 1-bath downtown somewhere, and it’s listed for $499,000.

In my professional opinion, it’s a decent condo.  I might not love the exact location, but it’s a fantastic layout for a smaller condo and that’s something that you can’t take for granted these days.  The finishes are nice and there’s a great view.

But there is a lot of product on the market in this price point.

So what’s the draw here?

How does the listing agent and seller move a unit like this, in a market like ours?

I’m honestly not sure.  I don’t think any of us know the answer to that question right now.

But I’ll tell you what isn’t the draw, or what not to do, and it’s this:

Yup.

An offer date.

An offer date on a 1-bedroom, 1-bathroom condo is already a bad idea.

But when you consider where this unit was last week, it’s even worse…

Yup.

This unit was listed for $639,000 and was unsold after 37 days on the market.

First of all, 37 days in the condo market is not a long time.  I’m telling my sellers that they have to be prepared for 60 days right now.

Secondly, the seller has already played his or her hand.  The patient already knows that the pill is a placebo.

Listing at $499,000 with an offer date is not going to fool the buyer pool into “bidding” the price up to $639,000, or thereabouts.

You know this.  I know this.

But why doesn’t the listing agent know this?  Why doesn’t the seller know this?

Feel free to ask, “David, is there any chance that the seller would consider an offer of $499,000?  Is that why they listed at this price?”

No.

Not a chance.

It’s wishful thinking and some buyers might want desperately to believe it, but those folks fall into a certain bucket along with this fellow…

Is that what the seller and the listing agent are counting on?

Maybe in 2021, but even then, the market was driven by demand.  There were scores of buyers, tons of demand, limited supply, and with the condominium market falling into true “seller’s market” territory, it was easy to list a property at an artificially low price, set an offer date, and use natural leverage to push prices up.

But today?

The mere concept of an offer date doesn’t make any sense in this condo market unless you’ve got a rare brick-and-beam loft or something that is in limited supply but has a tremendous number of potential buyers.

Taking this one step further and considering an offer date “strategy” after the property has already been listed at a higher price makes absolutely no sense.

Here’s another one that puzzles me:

Nice condo, don’t get me wrong.

But the “strategy” here isn’t going to bear fruit.

This condo is listed for $799,888 with an offer date.

And not with your typical offer date that’s 6, 7, or 8 days after the property is listed.  This offer date is a full fifteen days out!

I suppose that’s because an offering this rare, exceptional, and sought-after needs to be exposed to the market, right?

Have a look:

I wonder how motivated the seller is.  Don’t you?

The problem is: this condo was just listed for sale for $949,990!

And now there’s a new listing with an offer date?

Hmmm…

It doesn’t make any sense.

I’m not trying to be mean-spirited or unsympathetic, so please don’t get me wrong here.  And I’m hardly on the outside looking in, since I have nine current condominium listings and as I wrote all through 2024 on this blog, I purchased two condos myself last year, with the feeling that we’re in a market trough and the long-term outlook is very different from what we’re seeing today.

But that word – today, needs to be understood.

If you’re a condo seller and you can’t or won’t keep the unit for 6-8 months, or a year, and you can’t or won’t put a tenant in there, then you have to be realistic about the market.

These are very tough conversations to have, by the way.  And agents like myself are having them daily.

But being realistic about the condominium market is the very first step towards sucesss, and many agents refuse to have those conversations with their seller-clients.

The result?

Something like this:

Beautiful condominium!

Absolutely nothing wrong with the unit.

However, the problem exists with respect to the price and the listing strategy.

Here are the remarks:

So we have an offer date!

Not only that, we have an agent that insists on being present for showings, which is a terrible idea since buyers hate that.  Any time a seller-client of mine suggests that I be present for all showings, I always ask them, “If you were trying on a swimsuit in a store change room, would you be alright if the store’s employee insisted they join you?”

Nevertheless, this condo, which is listed for $1,199,000 with an offer date, was just terminated at $1,488,000.

Yes, the seller and listing agent believe that the “strategy” of under-listing by $300,000 and setting an “offer date” will help to convince the buyer pool the offering is too good to be true, have them flock to the condo in droves, submit bids, then get carried away and bid up a storm!

Only, that ship has sailed.

A long, long time ago, as the listing history shows…

Wow.

If only I could find the words to describe this situation.

Let’s see…..I’m a cynic and from time to time I can be quite childish.

I’m also a 44-year-old dad with one eye in the rear-view mirror at all times, so put that all together, and instead of telling you what I think about the above “listing strategy,” I think it might be funnier (for those of you that are my vintage) to let this Public Service Announcement from 1992 speak for me…

I just told you how childish I am!

But it’s better than a simple line, “Those sellers are on drugs,” isn’t it?

Plus, we get to take a trip back in time, and who doesn’t love doing that?

If you have a friend or colleague who was a child in 1992, try singing the first few words from the chorus of that Public Service Announcement and I guarantee your friend will pick up on the lyrics and start singing along too.  Many of us haven’t heard this in 30 years, but those words are buried somewhere deep in the recesses of our mind…

Ah, yes, the 90’s!  Most of the life lessons my generation learned and still holds near and dear today were taught when this video came out.

The average Toronto home price when this video was released in 1992 was $214,971, by the way.

Just take that in for a moment.

I can’t imagine what the average condo price was, but then again, I would think over 99% of the condos in Toronto today didn’t exist back then.

We’ve truly come a long way.

And yet we have such a long way to go in this condo market.

I might be childish for posting a 1990’s Public Service Announcement to describe the actions of listing agents in this condo market, but I’m still far more mature than those who are hosting their third offer night on a 1-bed, 1-bath condo via their ninth listing.

This condo market is really tough.

So it really surprises me when sellers and listing agents go out of their way to make it tougher on themselves…