The “FOR SALE” sign has been on the lawn for so long, it’s basically become a part of the landscape – at least in your mind.

You drive by the house every day on your way to work, and most nights, you drive by it on the way home too, which merely furthers the point: this property isn’t selling.

You honestly can’t recall when the sign went up on the lawn.  Was it February?  Around the Superbowl?  Or was it at the start of the New Year?  Or maybe, just maybe, it was before Christmas last year.

When the sign first went up on the lawn, you thought, “Oh, hey, wow, that house is finally done, and now it’s for sale!”

But after driving by the house a hundred times, and seeing the sign for six or seven months, you don’t even notice it anymore.

That lawn sign is basically like the small spruce tree right next to it, except only one of them is growing.

You know what I’m talking about, right?

That residential infill home that was built in your neighbourhood and then listed at a ghastly price, and simply won’t sell.

All homes sell eventually, but this one feels like it’s going to take years.

In many cases, it does.

I’m talking about residential infill builder homes, specifically the “McMansions” that independent builders construct by either tearing down an old bungalow or subdividing a lot and building two houses on site.

If you listen to my podcast, you might have already heard this one, so fair warning.  But today, I want to regale you with the common mistakes that infill builders make, drawing on a recent experience that Matthew and I had when we were called in to pitch on a listing.

Pitch on a listing.

That’s the first clue – the developer usually interviews six agents from the area, learns everything he needs to, then lists with his friend.  But in many cases, the location agents don’t want the listing, as was the case when Matthew and I met with the builder.

This story takes place in a neighborhood which we’ll call “Fair Verona,” just to protect the anonymity involved.

After seeing the property and meeting with Jerry, the builder, Matthew and I had Jerry come to the office where we did a full listing presentation, as we always do.

But in this case, we did something new.

We did something that, I suspect, no other real estate agent has ever done for (to?) Jerry, for any of the houses that he’s built.

We showed him how builders always make the same mistakes, and encouraged him not to follow suit.

The following are discussion points for today’s blog but also the verbatim points (in bold) that we showed Jerry in our presentation…

Builders do not typically build for users within that specific neighbourhood.

Is Roncesvalles the same as the Beaches?

Is Markham the same as Mississauga?

Is one detached home the same as the next?

Time and time again, builders will see opportunities in areas that they know nothing about, but decide that their build will work in a different area, or worse yet, that they’ll simply “figure it out.”

Most do absolutely zero research on the area, the residents, the demographic, the housing styles, and the wants and needs of those who live and buy there, and the result is that builders often construct houses that are incongruent with the area and the buyer pool.

At the risk of using the term “905” as a noun, adjective, and maybe even a verb, it’s fair to say that 905-builders are consistently bringing their ideas to the central core of the 416, and it doesn’t always translate.

As I’ll describe in subsequent sections, this creates issues before the builder has even broken ground.

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Builders often include features that are valued by other buyers, in other markets, but not this market, ie. pools, basement apartments, or particular design elements.

As I said, the styles and features that are prevalent in certain pockets of Richmond Hill, King City, or Woodbridge might not be popular in Chaplin Estates or Bedford Park.

Jerry built a very small pool in the very small backyard.

We told Jerry that this devalued his property.

He asked us what the hell we were talking about, and we told him that his lot was too small for a pool, but he put one in anyways, so it would cost the buyer a lot of money to fill it in.

“Fill it in?” he yelled.  “Are you crazy?”

We explained that in this neighbourhood, many residents have cottages or belong to clubs and don’t need or want a pool in their backyard.  If I’m being honest, I don’t see the appeal to pools in Toronto to begin with, on account of our short four-month window for usage, but I’m sure glad my father has one!

I explained to Jerry, “Most buyers don’t want pools.  If a buyer does want a pool in this area, they’ll seek out a pool-sized lot, specifically looking at A-rated locations, or at worst, a B-rated location, within this neighbourhood.  As we’ve discussed, this house is in a C or D location, so nobody who wants a pool is going to want this house.”

How’s that for honesty?

Jerry also built a basement apartment in this house, which nobody wants.  I’m sure that he comes from an area and a culture where people invite their ailing parents to live with them, but that just makes him and his family better people than those who live in Fair Verona, since nobody in Fair Verona wants their parents living in their basement!

I was even more honest with Jerry when I said, “People who live in Verona don’t want a basement apartment because they don’t want their neighbors thinking they need basement income.  It’s snobby, but that doesn’t make it untrue.”

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Builders overvalue items of less importance and undervalue items of greater importance.

Jerry crammed five bedrooms into a house that would have properly fit four.

Nobody in Fair Verona “needs” five bedrooms.  Buyers in Verona covet four well-apportioned bedrooms, with ample closet space, and a great second-floor flow.

By including five bedrooms in this floor plan, Jerry wasn’t able to put a walk-in closet in the master bedroom.

Who is spending $3.5 Million on a house without a walk-in closet in the master bedroom?

Jerry didn’t understand the buyer demographic here; the husband who has lots of suits and shoes, and the wife who has lots of heels, tennis skirts, and seasonal attire.  How the hell are they going to fit all that in a double-closet?

Jerry talked about the five bedrooms, the backyard pool, the basement apartment, and the TARION warranty like they were all fantastic features, but I explained that nobody wants a pool, people want four bedrooms and closets, and that buyers don’t know or care about TARION.

“But this cost me money!” Jerry said about the warranty.

I explained, “Just because you incur an expense doesn’t mean you can pass that along to the buyer as value.”

Jerry glossed over the lack of a master bedroom ensuite closet and said, “They’ll figure it out.  If they like the house, they’ll make do.”

But they won’t make do because they won’t like the house, Jerry.

Builders have a habit of putting tremendous importance on things that they like and they value, while not understanding what the buyers actually want.

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Builders typically overvalue the home, list high, and reduce the price over time.

We should have led with this one, right?

But that’s to be expected!  You don’t need me to tell you that builders price high, right?

During our presentation, we showed Jerry multiple examples of this in Fair Verona.  Consider this:

A house is listed for $4,199,000, and it’s on the market for three months.

The property is then re-listed for $4,088,888, and it sits for another thirty days before being terminated and re-listed for $3,999,000.

That listing is left to rot for three months before the seller fires his agent, hires a new brokerage, and re-lists at the same price of $3,999,000.

Two months later, Christmas rolls around, and the listing is terminated.  For some odd reason, when it’s re-listed in late-January, it comes out at a higher price!  Now it’s up to $4,095,000.

But that doesn’t work, of course.  So the new “strategy” is to list for $3,495,000 and set an “offer date.”

That fails, so the property is re-listed for $3,999,000 and sits on the market for three months.

After that, the listing brokerage is fired and replaced with a new broker who lists the property for $3,799,000.

That’s a decent price reduction, but still too much!

After only thirty days, the seller and agent come up with the bright idea to list at $3,299,000………..wait for it………with an offer date!

This doesn’t work, so they re-list for $3,695,000.

At the risk of boring you, let’s just say that the property finally sells after 15 months on the market, with 3 different agents, for $3,420,000.

This is how builders price.

The result is that the builders’ actions backfire because:

Buyers know that the price will come down over time and that there’s no rush to see the house.

When you’re a builder and you price like all builders do, all you’re really doing is telling people who live in the neighbourhood, “Hey folks, just hit the ‘snooze’ button and we’ll see you in a year!”

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Builders don’t understand that buyers assign a stigma to a house that isn’t selling, and don’t like being “that person” who buys a house on its 4th listing after 11 months.

Don’t shoot the messenger, folks!

But as I have mused over the past decade, “Real estate in Toronto is a sport.”  Sports are competitive.  So are people.

We were introduced to the concept of “Keeping up with the Joneses” back in high school, and damn if a lot of Torontonians aren’t turning this metaphor into reality.

Now imagine this scene…

Nancy is with her two children at the local splash pad, and she notices the kids playing with two other children.

As one typically does, Nancy catches the eye of the other children’s mother, and they smile, exchange pleasantries, and then start small talk.

Conversations about where you live always come up eventually, and Nancy asks the mother, Fiona, how long they’ve lived in the area.

Fiona then returns the question, and Nancy says, “We just bought a house, actually,” and describes it.

A light-bulb goes off in Fiona’s head and she says, “Oh that house?  The one that’s been for sale forever?  Oh, wow, you bought that house?”

Poor Nance!  Just imagine what she’s going to tell Kevin tonight over a chilled Zinfandel.

Sounds snobby, right?

Of course it is!

But that doesn’t negate my point, does it?

There’s that old saying that we all know: “People want what they can’t have.”  The psychology behind this is very present in our real estate market, whether it’s hot or cold, and the opposite can be true as well.  In this case, people assign a lower value, financially or in terms of status, to a property that nobody seems to want.

Builders don’t understand this.  They don’t seem to realize that people don’t love the idea of buying a house that’s been listed for 15 months.

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Builders don’t understand the need for a “story” or some element of character or warmth.

It’s called “marketing.”

It’s been around for a long time.

Builders believe that their vacant, sterile, institutional, gaudy, tasteless, often ostentatious new build is all that’s needed to lure in area residents by the lot!

As a result, they do nothing to “warm up” the house.

Some builders don’t stage the property at all, which is a huge mistake.  But other builders stage their gaudy house with gaudy furniture, and suddenly it’s black-and-gold everywhere.

Don’t get me started on that staging “trend” where you put Louis Vuitton, Hermes, and Rolex boxes and shopping bags in the master bedroom closet.  I know that somebody in the comments section is going to say that this plays well with particular demographics, but in Fair Verona, it doesn’t.

There are buyers who like peeling the blue plastic off their never-before-used kitchen appliances, but “new” doesn’t always add a premium, and builders don’t understand this.  Many buyers believe that builders are more likely to cut corners and cover up problems than a “family” who previously lived in the home, and I’m one who holds that theory near and dear.

And when some builders do try to tell a story, they usually get it wrong.

You’ve all seen the listing with the Ferrari superimposed in the driveway in the feature photo, right?

This isn’t what people are looking for, but builders are too busy chiseling the street number of the house into that giant stone on the front lawn to notice…

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Builders typically hire out-of-area agents and don’t realize this lowers the brand value in the eyes of the buyers.

Tell me I’m just looking to pump my tires here, but hear me out…

If a true “snob factor” exists in a particular area, like Fair Verona, then you can understand the point I’m making, right?

Replace “snob factor” with something called “brand value,” and like it or not, I’m on to something here.

I told Jerry, “Bosley Real Estate has deep roots in Verona, we’re a well-known brand, and we’re respected and trusted.  But I’m not going to pretend it’s just Bosley.  Chesnut Park is another.  Same with the Heaps Estrin brand.  These are brokerages, agents, and brands that people in this neighbourhood trust, but more importantly, people assign a value to the representation.”

I can’t name names and detail exactly what I told Jerry, but I said, “You put a sign from ABC Realty Inc. on the front lawn, or get the colours and logo from XYZ Brokerage Inc. associated with your house, and you’re simply devaluing it.”

I’m not wrong here.

Tell me that the people who live in this area are snobs, but it doesn’t make this untrue.

Jerry didn’t understand this, of course.  I’ll tell you why at the end…

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Builders use very distinct, often ornate finishes that can clash with prevailing styles and trends within a specific neighbourhood.

You’ve got tile on the floor of your master ensuite bathroom, right?

But what about the walls?

No, seriously, what if the builder of your home took the floor tile and put it on every wall in your bathroom, and then, for good measure, the ceiling too?

I visited a new build like this a couple of weeks ago, and I was aghast.

This bathroom was like a mausoleum, and while I’m sure there’s a market for this “style” in some locations and among some demographics, it didn’t fit this area.

The kitchen had black floor tile, black cabinets, and black granite counters.  I felt like it was designed by that goth kid in our Grade-9 French class.

There was stone everywhere.

It was like a damn quarry.

It was like Home Depot itself came alive, drank tequila, and puked all over the house.

I’m not the trendiest guy in the world, but in Fair Verona, it’s pretty simple: traditional rules.  Light and white.  Neutral isn’t boring.  It’s not rocket science, and yet builders act like they need to reinvent the wheel…

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Builder houses typically sell via the 2nd or 3rd listing agent.

This was specifically for Jerry, but it’s something that I’m sure a lot of you will notice now that I’m mentioning it.

Let’s say that a builder lists his property for sale at an egregious price, lets it sit for months, then lists it low with an offer date (a strategy that fails), then re-lists it again, and again, and again.

When this multi-act production is finished at the end of the year, which of the following thought processes do you think the builder will go through:

1) “Wow, I really messed this up.  I over-priced the house, which doesn’t fit with the area or the buyer pool, and my pricing strategy was all wrong.  I need to drop the price.”

2) “This is all my agent‘s fault.  I need a new agent.  Somebody who will see my vision.”

My question is rhetorical.

Builders often sell via the second or third agent to list the property, since they’re never going to realize the error of their ways.

Alright, so what happened with me, Matthew, and Jerry?

Well, this house was likely worth around $3,200,000, and we told Jerry as much.

Jerry vehemently disagreed with us, despite our presentation on recent sales, market trends, and knowledge of the neighborhood, and repeatedly told us that his house was worth $3,800,000.

At one point, I told Jerry, “I’m going to ask you a rhetorical question,” and I put the listing for a recent sale up on the screen in our boardroom.

“Is your house better than this one?” I asked him.

The question was rhetorical.

This house was in an A+ location and his was in a C- at best, but I might say it was a “D” as far as locations within Verona go.  This house was a half-block from the public school, steps to the library, splash pad, and park, and on a very quiet, two-block street that had zero through-traffic.  This was one of the most sought-after streets in Verona.  The house was on a wider lot, with a better layout and flow than Jerry’s house, and without that wasted fifth bedroom.  The house had all the features that buyers in Verona were looking for.  But the house was ten years old.

The answer to my question was obviously “No.”

What did Jerry say?

He literally threw his arms up in the air, waved them, and said, “OF COURSE NOT!”

“My house…” he said, as he went on and on, demonstrating that he didn’t absorb any of what we said.

Jerry told us, “Alright, listen, we’ll list the house for $3,849,000, and we’ll see what happens.”

We told Jerry that we appreciated the offer, but there wasn’t an opportunity for us to work together.

He actually got quite upset, but it wasn’t just with Matthew and I.

Real estate can be a small community sometimes, and I knew two other agents who had spoken to Jerry, both of whom did not want to work on the listing.

In the end, Jerry listed the house with an agent from the 905, with a discount brand, but not at $3,849,000.

Less?

Nope.

More!

He listed for a whopping $4,149,900, and I have a theory as to why.

While local area agents were busy telling Jerry that he built the wrong house for the area and he was over-valuing it by 20%, the out-of-area agents were busy bidding on his listing!

The agent who took the listing at $4,149,900 probably thought that some other agent told Jerry it was worth $3,900,000, so she had to tell him it was worth over $4,000,000.

That’s what we call “buying the listing,” and it’s a topic for a future blog post.

But it’s ironic considering Jerry offered us the listing for $3,849,000 and some other agent took it at $4,149,900.

That agent, by the way, is synonymous with over-priced listings.

So what Jerry also fails to realize is that in Verona, when people see that listing agent’s name on the sign, they’re going to think, “Oh, that house must be over-priced.”

One final point, just because I feel it needs to be made to about five percent of you…

I don’t want anybody to read the preceding and think that I’m saying, “We only list properties for rock-bottom prices that will clear ’em out!”

On the contrary.

I believe that my team and I do a better job of preparing listings for sale than anybody else out there, and that we spend more money on our listings than anybody too.  We’re competitive and we fight for every dollar for our clients, and we’re anything but transactional.

It’s just that not every buyer or seller will jive with us.

And working with builders is a completely different animal…