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re: CTV Toronto News: real estate listing's LOW PRICE=CRAZY OPEN HOUSE=BIDDING WAR

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re: CTV Toronto News: real estate listing's LOW PRICE=CRAZY OPEN HOUSE=BIDDING WAR

[TLDR: see 'conclusion' at bottom]

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."
[/font]This weekend (Sun 27th), they aired a follow-up [Video link]

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."
[/font]caption from Toronto.CTV.ca video story webpage:
Image
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:
  1. 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!).
  2. 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!
  3. 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.
  4. 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.
The initial so-called "story" on CTV Toronto News was hardly news-worthy and in my opinion the pricing strategy and tv news crew invite was entirely self-serving -- it was nothing more than a ploy by the real estate agent to get some free tv exposure for herself and this particular home she was selling. Not only does more interest = potential bidding war = potentially higher commission, but she gained for herself a captive audience and network of potential home buyers, even if it wasn't for this particular one. The mountain of some 200 business cards (pictured here) she netted in one day is just the tip of the iceberg..

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. :o
14 replies
Jr. Member
Oct 11, 2010
111 posts
31 upvotes
Nice catch. This set of news specials was pretty clearly just thinly veiled advertising, so kudos to the agent for pulling that off. Maybe I'm overly skeptical, but I doubt most viewers would go through the due diligence you did even if all they'd need is Google and a bit of patience. I don't see it as much different than real estate boards comparing fresh with year-old adjusted numbers to spin a story - or more accurately, news outlets publishing the comparison without making the necessary caveats clear.
Deal Addict
Jul 28, 2009
1370 posts
381 upvotes
This is so stupid. Obviously people are going to flood in if you put it $200,000 below market... simple supply and demand. Why is this in the news? :/
Deal Addict
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Mar 30, 2004
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Glad to see you're still showing the same ingenuity you used to on Crapwagon :D
Deal Guru
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Oct 24, 2012
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Montreal
The success is that it sold in just 7 days.
Deal Addict
Nov 24, 2004
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Toronto
This illustrates why bidding wars are not in and of themselves necessarily a sign of market strength, and why Realtor boasting about homes sold "over asking" is meaningless.
Deal Addict
Jan 11, 2004
4926 posts
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Victoria
TLDR version:

1) lazy journos generate non-story about low listing price of a duplex in toronto
2) real estate agent marketing strategy works and lots of interest is generated, house sells quick but still less than "market value" by about 80k
3) lazy journos generate non-story about how the house sold for 120k over list price
4) renegadex is starting to realize that it's best not to believe everything you read/see written by journos
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[OP]
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Dec 13, 2002
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dealguy2 wrote: 4) renegadex is starting to realize that it's best not to believe everything you read/see written by journos
That's not at all accurate.
CorSter wrote: Glad to see you're still showing the same ingenuity you used to on Crapwagon :D
Thanks. And I see you're still using that awful avatar.! ;)
alkizmo wrote: The success is that it sold in just 7 days.
Fair point if that was the seller's primary goal - especially as more eyeballs on your house increases the chance you'll find someone who likes it. But all it takes for a quick sale is for a seller to receive an offer and accept it. The problem in most instances is that a house that's priced 'too high' either doesn't get an offer, or the seller chooses not to accept an offer that is received.

Don't you think this seller might have had similar 'quick sale success' had he been been willing to take a $50-60,000 hit when the house was put up for sale back in 2011 - either by lowering his listing price to generate offers, or by accepting a 'lowball' offer?

This all reminds me of a thread from a couple of years ago on privately-listed house pricing that was more expensive than comparable MLS listed houses [here].
Deal Guru
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Oct 24, 2012
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Montreal
RenegadeX wrote: Don't you think this seller might have had similar 'quick sale success' had he been been willing to take a $50-60,000 hit when the house was put up for sale back in 2011 - either by lowering his listing price to generate offers, or by accepting a 'lowball' offer?
The seller may have hoped to get a bit more by doing this marketing stunt.
Im even wondering if there wasn't false bidders in the group just to prevent the situation where only one buyer was willing to go to a reasonable price and said bidder wouldn't have been brought up to that point without other "commited" bidders.

If the false bidder got stuck with the winning bid, they just get out of it by claiming something like "can't get the financing" or "unacceptable problem with the inspection" then they'd repeat the cycle.
Jr. Member
Nov 11, 2012
140 posts
14 upvotes
Toronto
When I was looking for a condo I looked at one that was 15% below market value. Ended up selling for 28% (20% more than market value) more than it was listed for. What a waste of time...
Sr. Member
Jul 14, 2008
574 posts
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6870RFD wrote: When I was looking for a condo I looked at one that was 15% below market value. Ended up selling for 28% (20% more than market value) more than it was listed for. What a waste of time...
85% OF 1 = 0.85, 1.28*0.85 = 1.088, so 8.8% over what's listed?

Am I missing anything?
Deal Fanatic
Jul 3, 2011
5768 posts
2930 upvotes
Thornhill
Good post! This needs to be said far more often because too many people assume that because a property had such extraordinary interest or sold for exponentially more than list that the market is booming.
RenegadeX;16251572[I wrote:...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![/i]...

At the end of the day, the house sold and it must be noted that in Ontario a buyer (sic) 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.

Far better to list at a reasonable price, and make your real estate agent WORK for the sale - and their commission.

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: ...Don't go and list you home 'dirt cheap' thinking a bidding war will cause your house to sell for more than its worth...

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).

---
Except I would disagree with these with an explanation
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...

The winner here is the real estate agent - a sale at a low price is better than no sale.
Granted, the list price was contentiously low given that just a week before a similar property sold for approximately $30,000 more with a list price far exceeding this $299k and which was still set for multiple offers that materialized. However the private seller, having failed to sell for more than a year, hired a Realtor who obviously created and caused interest in the property that he could not generate and which in turn led to a sale. It was what he couldn't or did not know to do and so her job was done at whatever price they agreed because that is why he hired her. IOW, he paid for the knowledge to get the job done.

It will be interesting to see how he reports his Property Guys listing because the alternative to hailing a "sold for 33.7% more than asking in 7 days " is to state "sold for 24.3% under list price in over 1 year.

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