re: CTV Toronto News: real estate listing's LOW PRICE=CRAZY OPEN HOUSE=BIDDING WAR
A week ago (Sun Jan 20th), CTV News Toronto aired a story on their evening news broadcast about a Toronto home that was for sale - its low listing price tactic was generating "quite a buzz". The always over-exuberant Colin D'Melo reported..
Quotes from the story last week:
- "..But this is no ordinary open house - it piqued the curiosity of HUNDREDS of buyers and real estate agents, and it's all because of one factor.."
- ".. the duplex is listed at $299,000. That's at least one to two hundred thousand lower than the rest of the neighbourhood."
- ".. The sellers knew it could generate a buzz, just not his much."
- [Seller's real estate agent] : "We had approximately 200 people through the open house yesterday"
- ".. And with so many interested buyers walking through, there's a potential bidding war brewing. The sellers know though, it's not always a guarantee.."
- [Seller's real estate agent] : "At the end of the day, with this much interest, you will find out what the house is worth."
- [D'Melo, back in the studio]: "The house has been on the market for about 6 days -- they are starting to take bids TOMORROW."
Some quotes from this week:
- ".. people lined up just for a chance to get inside and look around - that generated buzz and a FLOOD of offers - TWENTY to be exact."
- [Seller's real estate agent] : "In my whole career of doing this, which is 8 years now, I've never seen that much activity on a home"
- "And that means high-fives today for [the real estate agent] and her client [named] - his home sold for $121,000 ABOVE THE ASKING PRICE!"
- "1,000 people in total viewed the Jones Avenue home.. [the real estate agent] says that's a positive sign for the Toronto housing market."
quote: ".. has sold for a staggering $121,000 above asking price"
$299K + $121K = home sold for $420,000.
The point of this post?
Viewers of this weekend's CTV Toronto News update were led to believe that the 'put it on the market at an ultra-low price' sales tactic was a 'staggering' success.. but that's a severely distorted picture, as it conveniently IGNORES the following facts:
- The property sold for $121K over "asking price" (ie: listing price) only because the asking price had been set artificially low, "at least one to two hundred thousand lower than the rest of the neighbourhood".
So, not only is it nothing to get excited about, but it's not even 'news-worthy'. (Imagine Mr. D'Melo's glee had the house been listed for $1 and sold for $250,000!).
- Despite all the 'interest', the home did not sell for any more than it is worth.
The $420,000 that it sold for was on the low end of (or lower than, in fact) the neighbourhood average, despite the 1000 open house walk-throughs and 20 offers. Additionally, the home was previously assessed (according to info I found online, see item below) at $470,000 - so it sold for $50,000 less than it was assessed for!
- The home did not sell for more than the SELLER thought it was worth.
In November 2011, the seller put the same home on the market, privately, and listed it at $468,000, stating its assessed value at $470,000 [Screencap] . Granted, it didn't sell at that time at that price, but additional upgrades had been performed since then (basement drainage pipe replacement and porch), and, as the Toronto home average selling price increased 7% in 2012 [Source], and as the low asking price tactic was employed to create interest and drive up the price, the seller must surely be disappointed in the price the home sold for.
- Successful?.. for WHO?
At the end of the day, the house sold and it must be noted that in Ontario a buyer does not have to accept any offer(s) received. But by listing low, the real estate agent virtually guarantees offers, and then a sale - because it's hard to argue against the fact that if literally hundreds of people (or a thousand) came through on open house day, whatever offers you do get must be a fair assessment of what the market believes your home is worth. If commission was 2.5% of the sale price, that's almost $12,000 in her pocket at what it went for - and $7,500 if it for some reason it was let go for the listed price - so it's in her interest to get the sale whatever it takes. Meanwhile, the seller's 'gamble' was substantially more risky - while a genuine bidding war at or around the hoped-for price could happen, you're enticing so many people with the low asking price that some potential buyers might be scared off by the overwhelming competition, many bidding bargain hunters will drop out when the price is bid up to something more reasonable, and the house could easily end up drawing a best offer substantially higher than the 'ask' but still substantially lower than had been hoped for.
Far better to list at a reasonable price, and make your real estate agent WORK for the sale - and their commission.
Here's a quote from an unrelated article titled 'Is an open house a waste of time?' found on realestate.msn.com: [Source]Los Angeles real estate agent Liz Johnson loves open houses, but not because they move her properties. The real reason Johnson holds them is because they bring her more business.
Prospective home buyers walk through and ask what other listings she has. "They've always been better for agents than sellers," she says.
I'm annoyed that having aired the initial piece, the follow-up (which I was now interested in) was more of the same -- name mention & face-time for the real estate agent, and all positive ("high five!", and I'm not even making that up) with absolutely no examination by Mr. D'Melo whether the seller was pleased with the price he got -- and therefore no examination of whether this a *worthwhile* sales tactic that savvy viewers might want to consider if we're selling our own home.
If the angle was: "a positive sign for the Toronto housing market", quoted by the real estate agent in regards to the high turn out for her open house, I'd say "Put a house on the market for $1 and I'd expect you could do double that - but even then I wouldn't for one moment suggest it indicated 'positive' signs for the housing market.".
And to that point, I'd also say the high open house turn out suggests more about the desperation for affordable housing in Toronto than it tells us about anything else, and with lower sales volumes and higher average selling prices (see link in '#3' above) than a year or 2 ago, that's not a good thing, especially not for a real estate agent (math: if the average house price increases 7% but you do 20% less sales volume than the year before and your rate of commission stays the same, you're behind). That furthers my point that this was a self-serving exercise..
And as for "List low, sell high?" angle ?? -- the fact of the matter is that buyers determine the selling price, not the seller. Potential buyers weren't interested at $468K (too high), 20 potential buyers were interested at $299K, but just 1 (it seems) was still interested at $420K.
CONCLUSION: It was "List low, sell low" in this case - even though CTV Toronto News would have us believe otherwise.
Don't go and list you home 'dirt cheap' thinking a bidding war will cause your house to sell for more than its worth.
The winner here is the real estate agent - a sale at a low price is better than no sale.
And if you're a real estate agent, please PLEASE don't call CTV Toronto to come do a story on you (I mean the property you're selling).
Funny sidenote: in yet another display of CTV Toronto News ineptness, when they showed the (busty) real estate agent high-five'ing the seller, someone in the CTV Toronto News studio proclaimed loudly, "[unintelligible exclamation].. I'D LIKE A CHANCE TO MEET HER!!", causing co-anchor Andrea Case to laugh out loud, while her mic was keyed-on, causing both to be heard over-top of Mr. D'Melo's narration.