Remember how I mused a few weeks back that “taking your house off the market and re-listing at a higher price” was the new in-thing to do?
Well there’s a new trend right now, and unfortunately, it’s even worse.
It involves sellers that know best, and seller-agents that won’t stand up to their clients.
What is this new trend? Signing offers back at HIGHER than the listing price…
We are now approaching 40,000 Realtors in the GTA, and the average age of a Realtor (and by association – the average experience), is dropping rapidly.
Whether it’s playboys that want to drive around in the Mercedes that daddy bought for them, trying to channel their inner Josh Flagg or Fredrik Eklund while they try and justify not really working a real job, or whether it’s a newbie that’s all-in with his or her career, but doesn’t quite now how to act – inexperience is rampant in our industry.
And I see it every day.
I wrote a column last week called “Shut Your Mouth,” which is just a snapshot of how a Realtor’s inexperience can cost his or her client money, and the crazy thing about that blog post is – exactly what I predicted would happen, happened! See the “addendum” to that post…
And earlier this week, I encountered a situation which is becoming all to familiar in this market.
If there’s one phrase that bothers me more than anything in this industry, it’s “This property is priced for multiple offers.”
We all know that, theoretically, at least, a property is worth what somebody is willing to pay for it.
So as an extension of that theory, if a property doesn’t get any offers, then it clearly isn’t worth the asking price, let alone was it “priced for multiples.”
Right?
Try telling that to a seller, a listing agent, or both, who were expecting multiple offers, and they’ll throw your theory out the window. Things like “logic” and “evidence” have no bearing when feelings and expectations are at stake!
Earlier this week, I took a client of mine to see a condo townhouse in the west end, listed at $429,900.
The unit was fantastic. It was in the location we wanted, with a ton of supporting infrastructure, and the unit itself had a ton of square footage, albeit with an uncanny amount of stairs! But having seen my client’s current rental townhouse, the number of stairs was actually less in the new property!
The townhouse came onto the market with a “hold back” on offers, which I found a little strange, since it was a condo townhouse, and most condos don’t have offer dates. I mean, some do, but if a new listing came out in a condo building – not a townhouse, but a standard condo building – I think the presence of an offer date would actually push people away, rather than lure them in. So if you’re a Realtor reading this, and you listed a condo with hold-back on offers – give your head a shake…
Despite the hold-back on offers, my client and I went to the property, checked it out, and really liked it. This was by no means a “dream property,” but at $429,900, it was a great place to call home for the next five years.
I didn’t feel that this property was going to get multiple offers, despite being set-up for them with the offer date. I told my client, “I wouldn’t be surprised to see an offer, but I also wouldn’t be surprised to see zero as well.”
Sure enough, offer day came, and there were no offers on the property.
With offers scheduled to be reviewed at 7:00pm, I met with my client at 6:55pm, after calling the listing agent and hearing the words, “We don’t have anything registered,” and chatted things over with my buyer.
She was ready to offer the list price, but I figured that with no offers, their upside at this point was actually less than their asking price. Once tomorrow hits, and the MLS listing is updated to show that there is no longer an offer date, and that they date itself came and went with no sale, it sends a message to the buyer pool that this property’s price is negotiable.
If offer day comes and goes, with no sale, the seller loses any and all leverage they might have had.
My client and I decided to offer $420,000 even, which was still a great price for the seller, and was $10K less than my buyer might have paid otherwise.
The current seller paid $315,000 for the unit four years ago, so an 8% return per year was something they should take and RUN with!
I emailed the offer to the listing agent, and told her, “We like it – but don’t love it. We’re not paying the list price for it. But you know what? $105,000 profit in four years is insane, and your seller should bow down and thank the real estate Gods!”
She’d be insane not to take this offer.
I mean, the fact that she got this property for $315,000 four years ago makes no sense. I’d have bought five of these in 2009 if I knew I could get a 1,400 square foot townhouse for that price! But whether or not she got a steal back then, it doesn’t change the fact that she’s looking at 8% per year for four years, which is beyond the average pace for a property like this.
We sent the offer in, and waited. My client went to see a movie, and I watched three hours of Rob Ford coverage on every single TV channel known to man.
At about 11:00pm, the listing agent called me back, and rather than saying, “We have a deal,” she started by saying, “Let me explain where we’re coming from here…”
I knew right away, what was about to happen.
“David, this property is priced for multiple offers,” she said.
Those represent my most hated words in all of real estate.
“The seller was expecting multiple offers – we all were. And to not get them is disappointing, but it’s also a miscalculation by the market.”
What does “BS” stand for, again?
I cut her off right there. I was fighting a cold, and I wanted to go to bed, so I just didn’t have time to placate her.
“I think I know where you’re going with this,” I said. “And if you’re giving me a sign-back, there’s no deal to be made.”
There was a pause.
“Tell me,” I said, “Please tell me that you’re not signing this back at asking”
“No, no,” she said. “We’re not going to take just asking. We’re signing it back over asking.”
Well, then! Since when do two wrongs make a right?
What happened next was right out of “Father of the Bride,” in the scene where Steve Martin is told what the per-head cost of each guest at the wedding would be.
She said, “We’re signing it back at four-(muffle)-thousand.”
I said, “What? Did you say four-forty thousand? Seriously?”
“No, no” she said. “Not four-forty thousand. Four-fifty thousand.”
I just about puked.
Here was a condo townhouse listed at $429,000, with ZERO offers.
And they had the audacity to sign it back at $450,000?
There was no logic. None, whatsoever.
I told the agent, “I appreciate your efforts, and I’m sorry for being short, but this is ridiculous. This was a giant waste of everybody’s time. This wasn’t really going anywhere, was it? Did your seller think – did she think for even a moment, that a buyer would pay $20K over asking, without any competition? She didn’t, did she? Did she?”
It was a bit of a rant, but it was warranted.
“There’s no logic here,” I said. “None. Why didn’t you stop her? Why didn’t you tell the seller she was dreaming and that she should just reject the offer we gave her rather than going down a road to nowhere?”
I just didn’t understand. Both parties were equally to blame: the seller for being clueless, and the listing agent for allowing it.
I want to get inside the mind of the seller. I want to understand why and how she thought a buyer would say, “Hmmm…..well, there’s no competing offers, and this property will be worth less tomorrow, but, what the heck, I’ll pay $20,000 over asking for this property!”
The listing agent said, “So what do you want me to do with this sign-back?” That’s usually a gage to see if my rant was authentic, or just a negotiating point, but I said, “Leave it with the seller. Let her dwell on it.”
And that was that.
There’s a saying in real estate, “Never let a deal die.” As an agent, you never want to be the one to kill a deal, and you always provide a sign-back, regardless of whether it’s the same number you offered before. We could have taken their $450,000 sign-back, and then signed it back at our original $420,000 offer price, but there was no point.
Some sellers just know best, and you can’t convince them otherwise.
The part that bothers me the most is that this seller, who clearly will NOT accept the $429,900 list price, will continue to offer the property at this price, which is blatant false advertising. If she has the property “priced for multiple offers,” and won’t take $429,900, the property shouldn’t be listed as such.
I guess it’s up to each successive buyer that views the property to learn this the hard way.
To the seller, I say, “Good luck.” Have fun leaving your property on the market until Christmas, then re-listing in the spring, with the transaction history present in the MLS archives, and chasing the ghost of a price you will never achieve.
To the agent, I wonder why she didn’t educate her client about exactly how a market works, and why you can’t sell a twenty-dollar-bill for $25, when you should be lucky to get $19.50 for it.
I wish I could say this was a “rare occurrence” in my industry. I wish I could say that this “seller knows best” mentality was demonstrated on a special day.
But unfortunately, the way things have gone this fall, I’d have to say it was simply “Tuesday“…
moonbeam!
at 8:06 am
Wow! David you have to keep us updated about the outcome of this listing….
Joe Q.
at 9:28 am
^ Agreed on keeping us updated. I want to see how this ends.
As for the first part of your post — it’d be fascinating to look at the distribution of licensed GTA realtors, by number of years they’ve been licensed.
Geoff
at 9:41 am
I’d be more interested in seeing realtors by deals they’ve closed personally than by years licensed, as there are too many part-time and every other saturday realtors out there for my liking. Still, that logic makes no sense based on a simple prima facie argument: If it was priced for multiple offers, they would have received multiple offers. Since they did not, it was not. Where’s MR. Spock when you need him?
Joe Q.
at 9:54 am
Good point. I think David did do a post on that recently.
Joe Q.
at 9:57 am
https://torontorealtyblog.com/archives/agent-statistics-the-top-1-of-the-toronto-real-estate-board/6629
Jonathan C
at 11:28 am
What’s more likely: the market is wrong or the seller is delusional? Hmmm…
To be fair to the agent, they may be better off suffering for six months through a series of price reductions (and accompanying humiliation) if it means they get the sale in the end. If they are hard up for listings, it’s better than having the delusional client fire you.
jeff
at 11:30 am
to even take this one step further…
I prefer ROI (Return on Investment) when explaining home profits to my Clients. Typically, Buyers do not pay in full when buying thus 8% return becomes somewhat irrelevant. Let’s say the Seller put down even 20% (although likely closer to 10%) when they bought for $315K…$63K. After deducting real estate commissions, land transfer taxes, lawyer fees, moving and carrying costs….a sale of $420K means they likely more than DOUBLED their money in 4 years! (4x their investment if they just put down 10%!)
Greed is not always good…sorry Gordon Gekko. I hope the Agent is not fueling the fire. Hate this!
Jen
at 11:47 am
I will preface this by saying that I have never employed this strategy before, but I have seen it happen numerous times before….and many times where the house does actually sell for more than list AFTER the offer date has come and gone.
While I agree with your logic for the most part, exposing a property to the market for only one week, is not going to reach all the potential purchasers out there. Some could be away, focused on another house, sick, yada, yada. I’ve seen many situations where just bad luck has resulted in no offers on offer night….but the property is actually worth more than the list price. Probably not the case in your post, but it does happen.
Secondly, the logic to always sign back is also deeply flawed. When a property has only been exposed to the market for a week or 2, you never know who will come out of the woodwork with an offer. Tying the property up with a signback more than a few hours, can hurt your seller. There was recently a house in baby point that was on the market for 2 weeks – buyer comes in with a lowball and the sellers sign it back for less than list with a 2 day irrevocable. In the 2 days, 4 other people registered offers.. The foolish buyers don’t accept the signback and the house sells for $50k over list! Sellers got lucky on that one and the first buyer missed a good opportunity.
ScottyP
at 10:21 am
One week should be plenty of time for potential buyers to come out of the woodwork with an offer.
“Being away”? I find it hard to believe that that’s reason enough to miss out on a great buying opportunity — isn’t that what you have an agent for? And in this day and age, anyone can be reached almost anywhere, anytime — with active buyers in the market being highly unlikely to disconnect and take a two-week wilderness trek in the Adirondacks.
“Focused on another house”? Maybe for a day or two, but one week is far too long to get tunnel vision with blinders on.
“Sick”? If it’s terminal, then yes, I can see that being a distraction. One week of being too sick to stay active and in-touch would be one heck of a flu.
Methinks it’s another reason: The townhouse was listed at a price that the market wasn’t willing to pay.
Sure, there’s usually some idiot out there who is out of touch and ready to be ripped off, but the strategy of “re-list at a higher price in hopes of hitting the Some Idiot lottery” is usually not a sound approach.
Jen
at 11:17 pm
Where do I begin….first of all, I encourage my buyers to have a LIFE outside of searching for a new home. That is one of my mandates – to keep their head on and their emotions out. Missing one house, one week because they’re enjoying some down time in the sun, is not the end of the world. There are plenty of fish in the sea and another one will come along. That is exactly the type of logic that gets buyers into trouble in the first place. That this house is the one and only great opportunity left in the market and come hell or high water, I will be there with a bid AND I will throw a stupid amount of money at it, because another one doesn’t exist!! Except it does exist and if you have some patience, you’ll find it.
Secondly, I don’t let my buyers purchase a property unless they’ve seen it 3 times….you think I’d let them put an offer in on a house just because I like it? Or better yet, their mother likes it!?
Lastly, when I said focused on another house…I meant literally. Offers the same night. Happens all the time and unless you’ve figured out a way to be two places at one time AND how to not get your buyer in a legal nightmare where they’ve accidentally bought two properties….well then sometimes, you’re focused on another property.
ScottyP
at 11:43 pm
That’s nice that you encourage your buyers to have a life outside of house-hunting. But if I’m truly focused on putting as much effort as possible into making the most important purchase of my life, I’m not spending a week in the sun. Sorry.
A weekend away? Sure. But that’s my point about being connected. Immediately upon return from said trip, the buyers should have a list of properties to consider as they slip back into house-hunting mode.
(Where I can see an issue is an extended business trip that lasts longer than a week. So there are exceptions. But generally speaking, if you want to buy a $500,000 property, you stay the $#%& home.)
So, I never suggested that someone put in an offer because their mother liked it. Sorry for the misunderstanding.
As for the “3 visits” rule, that’s very noble of you. And, in many cases, completely unrealistic.
Jen
at 8:54 am
“As for the “3 visits” rule, that’s very noble of you. And, in many cases, completely unrealistic.”
Are you serious? Buyers are making the biggest investment of their lives. Studies have shown that your home, is one of the three most important factors to your happiness in life. You don’t think a buyer should MAKE the time to be sure it’s the right decision? If someone can’t find the time in an entire week to see a house 3 times, that’s pretty sad. Or maybe it’s their agent that just doesn’t want to invest THEIR time…..that’s the more likely scenario.
ScottyP
at 4:02 pm
Yes, I’m serious. Two visits is a good idea, of course — such a big decision should be a rational one (hence my theory about, you know, staying close to the city when in the midst of a such a life-altering search).
But to not “let” your clients make an offer unless they’ve seen a property *three* times, no exceptions, in a hot market — while ALSO encouraging them to soak up the sun to their heart’s content so as to have a life outside of house-hunting — makes me wonder whether you’re serious.
I’ll give you this, though — you’re very good at putting words in other people’s mouths. I wouldn’t want to be a competing agent across from you at the bargaining table.
jeff316
at 7:29 pm
My experience is completely anecdotal, but I’d agree with Jen’s assessment.
The first house we were prepared to bid on sold when two buyers saw it on the same day. A bidding war ensued and it sold over list for more than 10 percent above asking – four weeks after it was listed. And the reason we hadn’t put in a bid yet was because we were new market entrants, dilly dallied for a week, our agent was at a family wedding and given our cold feet we wanted to wait until he returned rather than deal with his co-worker he had assigned to us for the two days he was away.
Re-list at a higher price isn’t my idea of a sound real estate strategy for a condo townhome in this market, but real estate strategy is often oversimplified to assuage our emotions and justify our hindsight.
ScottyP
at 12:33 pm
Fair enough, I can see where such a happenstance could take place… especially when it comes to inexperienced buyers and/or agents.
(An aside — New favourite word: “Happenstance”.)
Still… I stand by my comment that one week *should* be enough time to reach a large enough buyer pool the first time around. And, if after one week the market is trying to tell you something as a seller, that in most cases you should probably listen.
Katy
at 3:13 pm
I agree with Jen. It’s completely possible for property to be worth more than asking yet result in no offers on offer night. The problem is once there are no offers on offer night, people start questioning the value and what is wrong with the property even when sometimes all that is wrong is timing. It’s hard to recover from that. Best option at that point is to remove and re-list the following season if you can afford to wait. What that agent did, was stupid, I agree – signing back over asking – they should have waited for another multiple offer situation before signing back over asking, however saying that property is never worth more than asking price if it doesn’t sell on offer date, is inaccurate.
Ed
at 4:36 pm
@ Katy
I hope you’re not a Realtor otherwise you are buying into the inane mindset that David is talking about.
“Waiting for another multiple offer situation.”
I can’t wait to see idiots like you TRY and work in a down market, when putting a sign on the lawn and “waiting for multiple offers” just won’t be enough anymore.
When the market turns, HALF of the Realtors out there will go get real jobs. Including the ones that spout nonsense like this.
Katy
at 2:17 pm
@Ed
We are not in a “down market” I am discussing current market and I am speaking from personal experience as I just sold a listing that didn’t receive offers on offer day but two weeks later received competing offers and sold over asking price. This happened to be my own house so I was doing everything I could to get the most money in the little time I had to sell the property.
Judging by your comments I’m guessing you are currently paying off someone’s mortgage and you are angry at the world for not being able to afford anything. As a seller or owner you would not be making these comments. You would want to know and try every method out there to get the most money for your house possible. No need to get angry, criticise other professions and opinions, learn from them and make your own decisions.
Eden
at 3:32 pm
“No need to get angry, criticise other professions and opinions, learn from them and make your own decisions.”
Right…but that didn’t stop you from criticizing other opinions like Ed’s when he disagreed with you. In trying to make your point, you provided an example about the sale of your own home. A house. Not a condo townhouse where an expection of multiple offers is ludicrous when buyers weren’t interested in the original price.
Then you went on to make an assumption that he is a renter thus he is angry at the world because he doesn’t own property. Please. I have seen too many message boards where people get rather defensive when another commenter disagrees with their marketing and sales tactics. Take your own advice and refrain from criticizing others and attempting to insult them.
ScottyP
at 12:27 pm
But he *did* call her an idiot, Eden….
RPG
at 4:42 pm
Half of the commenters here completely missed the point. David I don’t know why you even try sometimes. You can’t get through to these people.
When sellers get more money than they expected, they say “A house is worth what somebody is willing to pay for it.”
When sellers dont’ get what they expected, they make claims like what the two commenters above said. Stuff like “saying that property is never worth more than asking price if it doesn’t sell on offer date, is inaccurate.”
I agree with Ed. I long for a declining market where negotiating makes a comeback.
JC
at 7:04 pm
I can’t stand the “priced for multiple offers” statement either. Why not be honest and say “we have no idea (or can’t be bothered to figure out) what it’s worth or what people would be willing to pay”.
Worse are the sellers that have every expectation of you somehow whipping up a multiple offer situation out of your hat and completely ignore your warnings against it. That you could get ZERO offers on offer night. That you could run into a situation that you just described. All because their friends friend Edna got 3 offers 4 years ago in the spring on their detached house in The Kingsway.
jeff316
at 7:34 pm
What’s so bad about it all though?
If you don’t like it, don’t participate.
If you don’t like it but really want the house, get them with a “fair” offer.
If they don’t take your “fair” offer and don’t end up selling for above asking, bask in the fact that you were right.
If they don’t take your “fair” offer and do end up selling for above asking, then they were right and you didn’t end up spending more than you wanted to.
That’s a win-win-win-win instead of a whine-whine-whine-whine.
Weirdy
at 11:33 am
Recently I joined a highs chool alumni group for my graduating year and wasn’t quite surprised to discover that approximately half of my peers who didn’t have plans for post-sec ended up being real estate agents…and a few more went to Alberta to work on oil rigs…
so yeah, some of these people who wouldn’t make it anywhere else are now running your real estate deals.
Eden
at 3:34 pm
Ha ha…running your real estate deals or “ruining” them. Either or!
ScottyP
at 12:24 pm
Ooooh, Weirdy’s on a high horse!