What Everybody’s Talking About: 325 Perth Avenue

Houses | January 23, 2014

One house.  Thirty-two offers.

And 33% over the asking price.

By the time you read this on Thursday morning, the newspapers and Internet will be flooded with stories about 325 Perth Avenue, and for good reason – it’s just insane.

So rather than examining what happened, which is what everybody else will do, I’d like to tackle why this transpired…

W2810617

At first, I wasn’t going to write about 325 Perth Avenue.

I was going to write about “a house in the west end,” or pretend this is a hypothetical, like I’ve done countless times in the past.

But after giving interviews with the Toronto Star & Wall Street Journal on Wednesday, and seeing how every media outlet, and countless other Real estate websites are going to talk about this house, I thought it’s ridiculous for me to have to keep a lid on this.

Sure, RECO rules prohibit me from “disclosing sale prices” for properties that haven’t closed, but come on – what planet are we living on now?  Zoocasa, Realosophy, and every other site is doing it.  Why can’t I?

If RECO has a problem with today’s blog, then their archaic rules are preventing them from moving this industry forward.  The public wants transparency, and I enjoy giving it to them.

Anyways…

325 Perth Avenue was listed on MLS on Tuesday, January 14th, at $639,900.

On Tuesday evening, the property sold for $848,625.

There were thirty-two offers on the property.

This is all the real estate community was talking about on Wednesday, and journalists throughout the city, and beyond, were scrambling to get their columns together for Thursday’s papers, with some of them throwing up shortened pieces online to be the first to “break the story.”

Most of Thurday’s media attention will likely focus on the property itself, the process for offers, and a lot of what we’ve heard before, over and over, in every story – how Jack & Jane Buyer, those poor souls, had their hearts set on this house, and had to join a “bidding war” for the property.

Enough of that.  We’ve heard it before way too many times, and it’s growing old.  Those “personal interest” stories are great when a nice young teenager rescues an old lady’s cat from a tree, but I feel that when it comes to hot real estate, we’re spending way too much time on it.

I’d prefer to focus on WHY this property sold for $208,725 over the asking price, or 133% of list.

Here are my five reasons WHY I think this happened:

1) No Available Inventory

Today is January 23rd, and I still have active buyers that I haven’t sent a single quality listing to in 2014.

There’s just nothing out there!

I’m still waiting for that dynamite 3-bed, 3-bath semi-detached in Allenby for $1M, as well as that 2 1/2 storey Victorian in Riverdale for $850K.  But I haven’t seen either of them yet.

What about a 4-bed, 4-bath in the Kingsway for up to $1.6M?  Nothing to be found.

How about That Leaside renovated, semi-detached?  Or that East York bungalow with a private driveway?

I have buyer-clients across the board looking for product, but there’s nothing available.

When 325 Perth Avenue hit the market last week, I told a reporter friend of mine, “Watch this listing – it’s going to be the first gong-show of the year!”

I was right, but that’s of little consolation to me.  I don’t want to work in a market where a house gets 32 offers, and I don’t think anybody else does either!  But with nothing available in this price point, in this location, or anywhere near here in this quality with the specs of Perth (deep lot, parking, renovated, great layout, basement income, etc), I knew this house was going to draw attention.  I didn’t think it would get 32 offers, but I knew it would be 10+, and that’s enough to get people talking.

Until we start to see some inventory, I’d expect to see multiple offers on every good house that comes out.  And even if we do get inventory, things might not change…

2) Under-Pricing

A reporter asked me on Wednesday, “Why do people do this?”

I said simply, “Because it works!”

A listing agent almost must under-price, because he or she knows that’s the way to get multiple offers, and that listing agent is working for his or her seller.  The listing agent that says, “I want to list this at a price that will drive buyers away and not create a frenzy” isn’t going to get the listing, and wouldn’t be doing the seller a good service.

This has worked time and time again, and as I’ll explain in point #3, I don’t think it’s the “fault” of the seller or the listing agent that the property sells for a crazy price, which it almost always will.

But for 325 Perth Avenue, which was probably “worth” around $800K all day and all night, pricing the house at $639,900 was the thing to do – IF you wanted to create a frenzy.  And in the end, the seller got a nice premium over what most people ‘might’ price the house at.  Having said that, a house is worth what a buyer is willing to pay for it, so who am I to say this house is worth $800K?

3) Inexperienced Buyers & Agents

I don’t want to step on any toes here, and this is the point that will ruffle feathers with my colleagues, but I’m beyond caring at this point.

There are 40,000 Realtors in the GTA, and I’d estimate that 30,000 of them would have gone into 325 Perth Avenue and said to their buyers, “What do you think?  Do you like it?  Would you be willing to consider an offer on it?”

Me?  My colleagues?  The other agents around the city that know what they’re doing?

We would have all emailed our clients before ever going in that house, and said, “There’s a great new listing at 325 Perth Avenue for $639,900, however, it’s insanely under-listed, and you have to look at this as though it’s really listed at $749K, with offers to follow.”

How many agents do you think did that?

How many of the 32 buyer agents in Tuesday night’s melee do you think had offers under $700,000, for a house that could have been listed at $799,000, and eventually sold for $848,625?

I’ve been on the other side of the table in these situations, and I know how clueless some agents and buyers are.

I had a listing last year for $899,000 that sold for $1,051,000, with seven offers, and some lady brought me an offer for $899,000 that was conditional on the sale of the buyer’s condo.

Really?

REALLY?

And not only that, but the buyer showed up, with all his friends, thinking he might be buying a house that night!

This agent had no clue what market she was working in, and had no idea what this house was worth.  But even worse, is that she KNEW there were six competing offers, and she still advised her client to offer the list price, as if he had a hope in hell.

(And before you label me a hypocrite for under-pricing, the sellers and I figured the house was worth $950K, and we were shocked at the sale price.  A couple agents in my office actually priced this house at $899K.)

There are far too many agents in the city that have no clue what they’re doing, and they’re running around, driving up the price of real estate with their actions.

If you’re a Realtor, and you’re reading this, and you advised your client to proceed with an offer on 325 Perth Avenue for $650,000, when it sold for $848,625, then give your head a shake.

I don’t know what else to say.

But when Toronto real estate is priced well below fair market value, it’s incumbant upon the buyer-agent to identify this, and explain it to the buyer(s).

When that house at 9 Hazelwood Avenue, which also made newspaper headlines, came onto the market last December, my buyer clients were savvy enough to walk inside and immediately say, “This is priced $100K low.”  It was that simple, based on their experience, and their knowledge of the market.  They knew the house would sell for $120-$150K over asking, and sure enough, it did.

So to all you active buyers out there, a word of advice: find an experienced, knowledgeable, hard-working agent, because your friend from university that’s been in the business for eleven months is going to walk you into an explosion like the one at 325 Perth…

4) There’s Something In The Water On Perth

Three years ago, it was another house on Perth Avenue that made headlines.  Read the original article from the National Post HERE.

236 Perth Avenue was listed at $469,000, and sold for $611,000, or 133% of the list price – exactly the same percentage as 325 Perth Avenue on Tuesday.

There were 17 offers on 236 Perth Avenue, which pales in comparison to the 32 offers on #325, but there’s just something about this pocket that seems to make headlines.

The funny thing is – #236 Perth was on an inferior 90 foot lot (compared to 125 at #325), and had NO PARKING space.  I say this is “funny,” because it casts a light on the ridiculous $639,900 listing price for #325 in 2014…

But however you want to look at this, coincidence or otherwise, there’s something to be said.

5) Misery Loves Company

I guess I could have said something like “It’s Easy To Join The Frenzy,” but for some reason I’m choosing to look at the downside of people’s decision to involve themselves in this mess.

I’ve been in offer situations with 14-15 offers before, and I’ve won.  So I don’t know where I can “draw the line,” but to get involved with 32 offers is just asking for trouble.

I think that people are inherently drawn to a frenzy like this, just like a moth to a flame.

People want what they can’t have, but people also want what others want as well, and I’m sure that a lot of folks got caught up in the melee just because it was so exciting and interesting to be a part of.

 

In the end, I think that 325 Perth Avenue is just the first of many homes that will sell for 133% of list price in 2014, although I will admit that 32 offers probably won’t be topped.

So hate me if you want, but I don’t think this is any indication that real estate prices are going down this year.

Bears – you’d better come out of hibernation soon.  Unless you’re of the “the higher it goes, the worse it will fall” variety, but I think 325 Perth Avenue shows us all what’s in store for 2014 in the housing market…

Back To Top

Post a Comment

Your email address will not be published.

34 Comments

  1. A Grant

    at 7:28 am

    It’s too bad the media will focus only on “133% over asking”, rather than the fact that the house was listed at 125% below market value to begin with

    1. BWV

      at 10:41 am

      The flaw in this argument is that “market value” was not a known quantity until the house was actually sold. It’s fair enough to say that it was underpriced, but to say that it was underpriced by a specific percentage can only be known in hindsight. It’s like how people love to say their house is worth such-and-such a price…it’s all just speculation until you have a signed Agreement to Purchase in your hand.

  2. Paully

    at 8:37 am

    I’m all for transparency. I’ll be a character witness for you at any future RECO hearing! The Luddites at CREA and TREB need to get into this millennium.

    No inventory? Stories like this may be part of the problem. If you are retiring and moving out of town, sure, bring on the insane bidding wars and the crazy money. But, if you want to sell and buy back into this market, do you really want to have to go out and compete with up to 32 others, multiple times? Nobody wants to do that, at least not any sane person. Every one of these clowns that put in an offer anywhere close to or below the list price just contributed to their own future buying costs by setting the new price bar higher. Not smart.

    When the last bear capitulates and figures that maybe it really is different this time, that will sound the final death knell for the boom.

    I’m going back to bed. Wake me up when this lunacy is over…

  3. Pete

    at 8:41 am

    I agree with A Grant. If underpricing is a marketing tactic, then it’s ridiculous for the media to act like getting more than list is a big deal. In the (now) distant past, when list prices reflected true market value, then people paying 33% more would indeed be a story. But with this? This just increases the hype based on a faulty premise.

    1. Joe Q.

      at 9:48 am

      I agree with you — in a climate where list prices are close to meaningless, acting as if “getting more than list is a big deal” is silly — but I think that the RE community is just as guilty as the media. It seems to me that a massive number of Realtors use “sold for x% over list” as a marketing tactic.

      1. Joel

        at 11:33 am

        Agreed, and I think that some buyers like it. I have a feeling there are many people around the water cooler bragging about being in a bidding war with 30 other people… even though they only offer 650

    2. Potato

      at 10:26 pm

      I agree. Would the media run a story “condo sells for $400,000 over asking” if it was listed for $1?

  4. jeff316

    at 8:51 am

    Also:

    6) Fully renoed. In theory, no costly upgrades in the near future increases upward bidding space.

    7) If there’s ready-made opportunity to make income, you know you’re paying for it

    8) Facing a school with a park and a splash pad.

    I’ve never understood the hoopla about streets like Perth and Symington and Campbell. Sandwiched in between a slightly crap part of Dupont and a relatively empty part of Bloor, still industrial in the northwest, hemmed in by the train tracks on two sides, a good 15 minute or more walk to Dundas West TTC station. If you’re getting a deal then ok fine, but 800 000$ plus to live in the Junction? That could get you a detached house in Hillcrest or the East End.

  5. Kyle

    at 8:58 am

    If you think that’s a gong show, wait until 145 Galley takes offers! It’s a gutter, but come on…Fully Detached Edwardian house on the South side, on the best section of one of the best streets in Roncy for….650K???!?!?!?! WTF?

    1. David Fleming

      at 12:08 pm

      @ Kyle

      Did you read the MLS description for Galley?

      “Being Sold In An “As Is” “Where Is” Basis, Non Functioning Furnace, Some Windows Missing. Roof Leaks/House Has Knob & Tube Wiring, Please Leave The Kids At Home When Coming For A Visit.”

      It’s basically four walls and a roof, but the roof leaks.

      1. grasshopper

        at 12:19 pm

        I thought that you were joking and exaggerating, but the listing for Galley actually says “Please Leave The Kids At Home When Coming For A Visit.”

  6. Joe Q.

    at 9:49 am

    David — any idea what the structure of this “multiple offer scenario” looked like? With 32 bids, was it a one-shot deal? Or did they pick the top N offers and let them go a few rounds against each other — and if so, what is N?

    1. David Fleming

      at 12:09 pm

      @ Joe Q.

      From what I understand, it was a one-shot deal, and the listing agent (who was the seller) had his own offer but they presented FIRST. That’s classy. You know there’s agents out there that would have “presented” last…

      1. Ed

        at 3:58 pm

        Hi David,
        can you please clarify this statement “the listing agent (who was the seller) had his own offer”.
        thanks

      2. Joe Q.

        at 10:06 am

        This is confusing to me too. So there was an offer for which the seller, listing agent, and buyer’s agent were the same person?

        1. David Fleming

          at 2:27 pm

          @ Joe Q

          Correct.

          The listing agent, who was also the seller, had his own buyer that he represented.

          I’m going to write about this situation this coming week. Stay tuned!

  7. FroJo

    at 9:50 am

    This is AWESOME! I’m chuffed that there’s so much money in Toronto. Plentiful jobs and high wages must mean that people are comfortable paying these prices now and well into the bright future.

    You may detect a little sarcasm in the above. Please don’t overlook the fear of the systemic strain and risk that this puts us all under. Like Fox Mulder, “I want to believe” … desperately. But like Dana Sculley, even after a few alien abductions and gobsmacking unexplainable doings before my unblinking eyes … I’m still sceptical.

  8. Josie

    at 10:43 am

    David points out that buyer agents have a responsibility to read the situation and not contribute to the mayhem and he is 100% correct. I went to the agent’s open house to preview this house for a client but did not even bother showing it to him. I emailed him and said “if you notice this house for sale, it is lovely but it will not sell in your budget so let’s pass.” The second thing that is true is what Joe Q said. Some listing agents intentionally under list without considering the risk to the seller so they could send out flyers “I sold this property for X above list price” and look like heroes. But there is peril in this strategy because it’s not foolproof and it may work for a few months into the year and then, for no apparent reason, it just stops working and the listing agent and seller are left wondering what happened. This strategy will backfire in a few months just like it does every year at some point.

    1. David Fleming

      at 12:10 pm

      @ Josie

      I agree about the marketing aspect. Now every single person that hires this listing agent is going to expect 133% of the list price.

      1. Josie

        at 12:57 pm

        Crazy crazy times David. Have a great 2014 which I am confident you will.

    1. AndrewB

      at 11:58 am

      I literally am reading this article right now at noon and was about to post it. Glad someone else stumbled upon it.

      161 comments to boot!

  9. AndrewB

    at 12:13 pm

    What I’m baffled by is the price this thing sold for. 848k buys you a lot of different properties across the city. This particular house is in such a “meh” area and I wonder how much higher the price ceiling could possibly go.

  10. Kyle

    at 12:21 pm

    Agreed it’s definitely a gutter, but i fell like it will probably sell for 200K over asking.

    Most of the people who have been buying in the neighbourhood end up overhauling their place before they move in anyhow. They’re definitely better off starting with something in this state than paying for someone else’s reno that they’re just going to tear out. But alas, it will likely be a flipper that buys it and re-sells it for 1.3M in a year.

    1. David Fleming

      at 2:22 pm

      @ Kyle

      I’m showing this house tonight, and it’s on my unnoficial list of “the best houses on the market right now.”

      I figure it’s going to push $800K sale price, and needs $200K worth of work. The street can support $1.1M based on comps, and if the market continues, then it’s a $1,150,000 house when all is said and done. I love your optimism re: $1.3M though!

      You live in Roncesvalles if I remember correctly. What’s the word on the street there?

      1. Kyle

        at 5:51 pm

        My take on Roncy, after living here for the last 6 years, is that it is changing by the day. The retail strips (i include Queen St W too) are amazing and keep getting better and better. And It’s becoming more and more family-oriented (if that’s even possible) and community-engaged (Farmers market, new town square being built in Sorauren Park with a large contribution from community donations, rebuilding Jamie Bell playground, rallying around saving the zoo, vounteers maintaining the natural ice rink, and the trees and flower beds that line Roncesvalles, etc). I think these changes are also reflective in the improving school scores. I’ve lived all over the city from Leslieville in the East to The Kingsway in the West, but Roncy/High Park is where i consider home and i just don’t see myself moving away from here. My guess is that most of the other homeowners would agree, and that’s why there is so little inventory. Once people come here, they don’t want to leave.

        I think houses like 145 are becoming rarer and rarer. Over the last decade, most of the “original” houses have turned over and basically been rebuilt to the new owner’s vision. So if a blank slate in an amazing neighbourhood is what someone wants, this is a really good opportunity. I wouldn’t even be surprised to see someone pay 800K for the lot and knock it down to build a brand new house, as it is near impossible for those wanting a sleek modern, minimalist home to even find a detached lot in a walkable part of the City for under $1M now.

      2. Kyle

        at 10:49 am

        @ David

        Shot in the dark here, you wouldn’t happen to have been taking the worst client ever to view Galley, would you?

        1. David Fleming

          at 11:49 am

          @ Kyle

          Wow, you have a great memory, and you clearly have been reading my blog for a long time!

          No, I’m lot looking for myself. 🙂

          I have a builder-client intersted, as well as an end-user, but I think it’s just too much work for the user.

  11. Julie

    at 1:05 pm

    While the whole 133% makes news, is the price really off in the current market? We looked at a 2 bed, 2 bath semi at Yonge and Lawrence last month. It was renovated but pretty tired at this point and it sold for $910,000 (asking was mid 700s). Renos will take it to $1M. This sale might stand out due to the 32 offers, but the price isn’t out of line with what’s happening to a lot of the market below $1M…prices are ridiculous in this whole segment!

    1. Agency Agreement

      at 7:09 pm

      I think the issue is more that the media is latching on to the 133%, when the house was just underpriced from the start. The entire metric “% of ask” is stupid in a world with underpricing as a marketing tactic.

      What annoyed me more was the whole “I’m genuinely, 100 per cent shocked by this. I did not expect this to happen — nor did I want this to happen. I’m not comfortable with this at all,” attitude from the listing agent / seller. There is no way he didn’t know what he was doing. I find it very hard to believe he would have sold the house if he only received an an unconditional offer at $639,900.

  12. Rob Fjord

    at 3:51 pm

    whats a house worth…what someone is willing to pay for it.–fools and their money!

Back To Comments