Recently a house sold that had the industry buzzing, and it showed up on a bunch of realtors’ social media feeds. Unfortunately I can’t provide the address, owing to bureaucratic reasons that go way beyond me, but anybody can find it on House Sigma within a couple of minutes if they are so inclined.
The house itself was a perfectly nondescript, dated 2 bedroom semi with no parking and an unfinished basement. It was located in the Danforth and Victoria Park area but south of Danforth, which isn’t exactly prime real estate given the proximity of the train tracks and the many commercial buildings sprinkled throughout.
This was certainly never going to be anybody’s dream home, but a location with potential nonetheless due to the proximity to the Danforth amenities and the subway line. I pegged the value of the house in the $700,000 range.
What got tongues wagging was the selling strategy the listing agent adopted. She decided to hold back on offers for a week and have an offer night. Nothing strange there. The vacant house was mostly decluttered and thoroughly cleaned, and showed fine for what it was. So far so good. Finally, the list price was set…at $349,00!!!
While some agents will say you can “never list too low”, I vehemently disagree. Setting the right listing price is crucially important, especially in shifting markets when buyers have more power. Coming out at $999,000 in Leslieville when you hope to get $1.2 million is one thing, but coming out at $349,000 for a house worth $700,000 in Oakridge is an entirely different kettle of fish.
The $349,000 listing price is completely arbitrary and is simply too low, much like Health Canada telling us we should have a maximum of 2 drinks per week (per hour maybe). It takes us all the way back to 2007 pricing, when Prince Harry was a slightly less annoying little bitch.
As soon as I saw this I thought why not just list for $1? This was a trend for a bit, and every now and then I still see $1 listings (which never sell). This approach is obviously ridiculous, mainly because there are so many agents that have literally no clue what they are doing. One of the jobs of a listing agent is to educate and guide inexperienced buyer agents (and there are so many right now) towards a property’s true value, and listing ridiculously low is a complete obfuscation of this duty.
Now don’t get me wrong, provided no rules are broken a seller can choose to list their property at any price they want. That’s their right, and their prerogative. And it is also their right to reject any and all offers that they receive.
So we have established that nobody did anything wrong here, but I still find the $349,000 listing price aggravating and highly problematic. Here’s why:
Meat Was Left On The Bone
In the end, the house received 33 offers and sold for $602,180. Seems like a smashing success at first glance, but as I mentioned earlier I believe the house was worth much more, closer to $700,000 in this instance.
You can have all the showings and offers in the world, but if it doesn’t translate into a good sale price it’s all mental masturbation. This house should have sold for more, even in this market, and would have with a different approach.
$349,000 is so low that buyers start believing there is something seriously wrong with the house, even if only on a subconscious level. I see this all the time with buyers for properties listed super low, and it can affect their confidence when it comes time to pull the trigger on the offer.
If it was me, I would have listed at $579,000 with the expectation of attracting 4 to 5 serious offers. With that approach I believe this house would have approached $700,000.
They Are Begging For Appraisal Issues
When appraisers see a house sell for 173% over the asking price, right away red flags start coming up. Lenders are extremely conservative by nature, and they simply don’t like seeing sales like this.
Consider this theoretical scenario for the buyer of the house. The buyer is a first time buyer, and they stretched to the max to get to $602,000. Like stretched to the very last penny. Furthermore, they only have the bare minimum down payment to boot.
Now, an ultra conservative appraiser decides the house is only worth $560,000, creating a delta of $42,000 on the mortgage. These are real, liquid funds that the new buyer will need to find under a mattress to close the deal. That’s not always possible, and deals don’t close and lawsuits ensue. It’s nasty business.
It Becomes Misleading Click Bait
The media coverage of the real estate market is nothing if not consistent, and by that I mean consistently misleading. Just the other day, blogTO actually ran a story with the following headline: Nobody is buying Toronto homes anymore as demand drops to lowest level in years.
It’s cheap and lazy clickbait, and utterly untrue as well. With our $349,000 sale, the clickbait practically creates itself.
Massive bidding war sees Toronto house receive 33 offers!!
Fixer upper house sells for $173k over the asking price!!
Hapless couple bids $200k over asking and still don’t get the house!!
Toronto couple fears they will have to rent forever!!
And on and on and on. The context of the sale is almost always left out or completely glossed over, but I guess the facts laid bare just isn’t that exciting, or profitable.
It Wastes People’s Time
One of the major things that the past couple of years hammered home is just how precious time is, and how finite life can be. We are all striving to be kinder to each other, and I believe that entails respecting other people’s time.
The $349,000 listing price unnecessarily wasted a lot of folks’ time. It pains me to write this, but I can virtually guarantee they had a handful of offers at or around the asking price. Of the 33 offers, I would estimate only about 5 to 7 offers had any real shot. The rest were whistlin’ dixie and spittin’ in the wind.
That means a lot of prospective buyers and agents took time out of their life to go view the house (probably more than once), contemplate renovations, go for another look at the open house with parents and then ultimately submit an offer that was dead and bloated on arrival. That’s time that could have been spent with family, or taking in a sunset on the boardwalk. Time that will never come back.