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…
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.
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…
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.
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…