What Pricing Games Scare Me The Most?
Not much surprises me on listings anymore. But that doesn't mean I still don't get spooked when I see the pricing games some listing agents try to play.
Did you guys dress up for Halloween? I've never been a big fan of dressing up but wifey really gets a kick out of it. This year just consisted of watching scary movies on Netflix all evening but we did manage to dress up Stu, our older cat, as Batman. Because he is, in fact, Batman. If you follow me on Instagram you probably already saw him all dressed up but let me see if I can find the picture...here we go:
He didn't mind, I swear :)
Speaking of Halloween, I thought it would be apt to write about a few things that truly scare me the most in real estate. More specifically, things that scare me when I see them on listings. We're all used to seeing different pricing games from sellers and agents in the Toronto real estate market, but some just spook me more than others because they create the most confusion for buyers and have the greatest chance of blowing up a potential sale.
Let's get started....
1 - Underpricing with no offer date: If you've spent any time at all watching the Toronto market over the years, you're surely accustomed to seeing houses and condos listed well below market value with a "hold back" on offers until a specified date. The idea is to generate enough excitement and buzz to garner multiple offers on offer night and sell well over asking. This game was created as a function of the market where demand far outstripped supply and has become the norm for the vast majority of freehold properties in the city, and was fairly common for condos before the market took a breather.
Whenever I meet with new buyer clients for the first time, I explain to them what a hold back on offers means, how pricing in Toronto works, and what to expect when it comes to sale prices. I mean, we all know that 3-bed/2-bath semi in Leslieville isn't really going to sell for $899k, right? And whenever I send them listings, I always comment "offers are on Thursday at 7pm" or "offers any time". Offers any time means just that - offers can be submitted at any time. But, more importantly, it signals (or at least is supposed to signal) that the property is priced at or slightly above what the seller expects/hopes to sell for. That's the point. "Make me an offer" is basically what they are saying.
So what happens when a property is listed below market value but at the same time allows for "offers any time"?
Here's what happened to me last week. I showed clients a 3-bed house outside the city, listed for $599k with "offers any time". My clients liked it, so I called the listing agent to let her know we might be making an offer the next day and to keep me posted on any activity in the meantime.
She replied with "Sure thing Adil. By the way, the seller wants $610k".
I paused for a minute thinking the agent had the listing confused with another and I clarified: "This is for 123 Main St yeah? $599k, offers any time? And you have no other offers at this time, correct?"
I had the facts straight but for some reason the seller wanted/expected to still sell for $10k over asking.
I took a look at the listing history and saw that the house was already listed for $629k until the week prior and sat on the market for 29 days without selling. And it was now on the market at $599k for 7 days, with no offer date. And no offers.
Why would any reasonable buyer think they would need to offer over asking? And why would any seller think they'll actually sell over asking without any competing offers, especially after failing to sell after a month on the market already?
My clients ended up offering below asking (obviously) and lo and behold, the seller countered back to us at...$610k! I laughed, shook my head, and proceeded to have a 30 mins phone call with my clients about how ridiculous the situation was. After some discussion, we decided to re-counter back to the seller again below their original ask, and at the same time my clients sent me half a dozen other houses in the area they said we should start thinking about if this deal never ends up happening.
That's what scares me about this type of stupid pricing game. It risks a deal from ever happening. Blame the seller, blame the listing agent...doesn't matter. Confusion never helps a deal come together.
2 - The second scary listing game I see a lot is the "soft hold back". This is when agents try to combine the benefits of an offer night, without the actual risk of not selling on said offer night. I'll often see this on listings "offers any time with strict 48-hour irrevocable". Meaning all offers must be valid for 48 hours. I've never been a fan of letting offers stay valid for this long. I mean, why give other buyers such a long window to also submit a competing offer now that there's a chance they might miss out? And why let the listing agent shop our offer around to other agents and try to drum up a bidding war. A long irrevocable is never in a buyer's favour.
Now there are some instances where 48-hours is actually needed. Ie, the seller may be overseas, there could be multiple sellers involved who are not easily reached, etc. Courteous agents will actually include a note on the listing as to why they need this long to respond to an offer. But for the most part, if you are selling your home, you should be easily reachable. So there's really no need for it to take 48 hours to get a hold of a seller.
So whenever I see these "soft hold backs", my first question is always "do these guys think they are actually underpriced but just worried about setting a hard offer date, or is this property actually fairly priced as is?" And then comes the confusion. And conversations with buyers about how this is technically an "offers any time" scenario, but that there's a chance multiple offers could result causing a random offer night scenario anyway. Anything that makes the situation confusing for buyers just makes things downright scary for the deal itself.
3 - The last spooky listing game I'll mention is whenever I see this in the broker notes for a listing: "Seller reserves the right to accept preemptive offer without notice". This is basically a big middle finger from the listing agent to every buyer agent out there pretty much saying "offers are next Thursday but we don't care. We'll sell this place while you're still showing it without even having the common decency to let you know there's already an offer".
Ok, it's not exactly saying that but it's pretty darn close. TREB rules clearly state that if a seller receives and is considering responding to an offer prior to the scheduled offer date, all parties who showed the property, all parties who booked a showing, and all parties who "expressed interest" in the listing must be notified, and the MLS broker notes need to be updated to reflect the change in offer day/time. There is absolutely nothing more frustrating than standing in a property with clients and getting a notification that says "property sold, no more showings". It's happened to me before and I'm pretty sure it'll happen again. And that's why seeing a note like that on a listing gives me the chills.
So that's it. Listing price games that scare me the most. Have you run into any crazy pricing drama that got you all worked up as a buyer? Shoot me a message - I'd love to hear about them!
Your Toronto condo lover,
Adil Dharssi Sales Representative iPro Realty Ltd, Brokerage Direct: 647-223-1679 (call/text) Email: Adil@AdilKnowsCondos.com