Tag Archives: tactic
$1 real estate listings are legal, but they often don’t work
By Mark Weisleder – Toronto Star Moneyville
One of the most widely read Moneyville stories in the past month is the one about the Oakville home that was listed for $1.
The house was originally listed for more than $1 million. However, when no offers were received, the price was reduced to $1 in the hopes of creating a bidding war. Instead, the ruse generated accusations of false advertising. While a few offers did come in, they were nowhere near what the sellers wanted, so the property was taken off the market.
Readers were angry and confused. Although few really believed the house was for sale for $1, they wondered whether this gimmick was legal and, more importantly, did it actually work? It is legal, but the tactic generally doesn’t work because everyone sees through it.
The $1 listing started appearing about five years ago. In the beginning, it was about getting the property noticed or creating a buzz. In reality, it was more about creating a buzz about the real estate agent, who received lots of media exposure. But it didn’t help sell the house. In fact, many agents have told me they and their buyers have not treated these $1 listings seriously in most cases.
When it comes to the law, real estate deals have to be in writing and signed by the seller and the buyer. Just offering to sell a home on the MLS system does not obligate the seller to accept any offer that is presented.
That is why if a house is listed for $500,000 and you offer $500,000, the seller doesn’t have to accept it. The financial terms may not be acceptable, the seller may have realized later that they had priced the property incorrectly. Or, perhaps the seller suffered a change in circumstances, such as losing their job, and could no longer afford to go through with the deal.
But this does demonstrate the importance of properly pricing your property to attract the largest number of potential buyers. Do not try to “test the market” by advertising a price that is 10 to 20% above fair market value. You will only succeed in helping sellers who are selling in your area for fair market value, as they will be able to compare their home to yours. Later, as you start to reduce your price, people will wonder whether the reduction is because something is wrong with your home that is not being disclosed.
Also do not price your home more than 7 to 10% below fair market value, hoping to trigger a bidding war. Buyers and buyer agents are more sophisticated now about pricing and can recognize this tactic, as well. In a way, it is not much different than the $1 listing strategy.
If you want to price your home to sell, first do the proper home staging to make it appeal to the widest number of potential buyers. Then, after obtaining opinions as to what your home should sell for, price it at a range between fair market value to, at most, 5% below fair market value.
By being more open and honest about the price you will accept, you will attract the most serious buyers who are ready to purchase a home.
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Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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If You Are Buying Real Estate You May Come Across The Bully Offer
Chandler Man – Favstocks.com
The normal real estate system is facing some new issues since the Toronto housing sector has intensified. Many home shoppers are being caught off guard by a maneuver known as a bully offer, that has become a prevalent way to seize properties off the market in advance of a bid date. This situation has placed Realtors in a dilemma of how to effectively serve their clients while retaining consumer faith in the bidding process undamaged.
The bully offer tactic is a consequence of the bidding system presently favored to bring attention to a property by publishing a low price and opening the home for showings, however not entertaining offers until a specified date. If one of the interested buyers puts in a bully offer – which is usually higher than the moderate list price – the stipulation is that the offer be agreed to before the bid date specified on the listing.
The home owner recognizes their opportunity to move their property fast and often accepts the bully offer to cut steps out of the current sales plan. For buyers in Toronto who have spent countless hours hunting for houses and Toronto condominium listings coming across a bully offer can upset your plans.
The purchasers that respected the offer date have not been pleased when they learn that a bully offer has been signed on a home that they had been waiting to bid on. Objections have been raised, and as a consequence new policies are currently in effect for home owners contemplating bully offers.
This kind of scheme is used mostly in Toronto but purchasers of homes in other nearby regions are also seeing it. If a bully offer is made and the vendor wants to accept it, the Realtor has to call all the bid candidates and let them know a bully offer has been made so they can have the chance to make a counter bid. Despite the fact the concept is good, the reality is that most potential buyers are not able to drop what they are doing to rush to the agent’s office with all forms filled-out for a bid with such short warning. As a result, the complete multiple offer process is voided if the bully offer goes undisputed and is accepted by the home owner.
Some real estate professionals do urge their clients not to accept a bully offer, however to wait until the scheduled offer presentation because there could be a higher offer tabled by other purchasers. This method has been advantageous in a lot of transactions, however the allure of taking the bully offer and fast tracking the sale is often too tempting to turn down. The would-be buyers who are left out in the cold in spite of following the rules spelled out by the seller are beginning to be irritated by the rise in bully offers.
The bottom line is that bully offers are creating damage to the entire housing market by undermining consumer confidence in the offer procedure. Realtors are having to put intense consideration into how they can revamp the policies to keep it fair while representing their clients’ best interest.
A solution for potential purchasers might be to turn to the Wasaga Beach real estate market and steer clear of the Toronto region however that is clearly not workable. As long as the real estate glut in Toronto is affecting the bid process, purchasers are going to have to stay on their toes to counteract any bully offers that impede their opportunity to bid.
Any reputable Realtor should advise their purchasers not to be bullied into making an offer that is higher than the present market value for any property.
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Contact the Jeffrey Team for more information - 416−388−1960
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Red-hot Toronto real estate shatters price record
Existing home sales in the Toronto area were up 28 per cent in September compared to last year, according to figures released Monday by the Toronto Real Estate Board.
By Tony Wong – Toronto Star
When Bill Thom listed his client’s Toronto bungalow for sale last month he expected a favourable response from potential buyers.
After all, the real estate agent had underpriced the property deliberately. But he also underestimated the strength of the market.
Comment: While this tactic has its time and place, it is used way too often by too many agents. The main thing it achieves is upsetting a lot of buyers.
The tiny 1,000 square foot bungalow in the Yonge and Sheppard neighbourhood of Willowdale was priced at $380,000. In one week, the home went through 170 showings. By the end of the week Thom and his client had 35 offers.
In a sale that still has the Toronto real estate community talking, the home eventually sold for $550,000 or an astounding $170,000 above the asking price.
“I didn’t expect that so many people would be interested,” said Thom. “It really shows how much stronger the market is despite the recession.”
According to the Toronto Real Estate Board in figures released Monday, existing home sales in the Toronto area were up 28% in September compared to last year. The board said 8,196 homes traded hands during the month.
Comment: That sort of volume is amazing. I cannot imagine what the numbers would be like if we did not have 42% fewer listings. I do not think there would be 42% more sales, but even if there were 20% more, we would be looking at close to 10,000 properties changing hands. Now that would shatter some records!
The average price of an existing home was also up 10% to $406,877. That’s a new all-time high for an average house price in the Toronto area. Compare that with 2008, when average house prices were $379,347.
Comment: Those numbers are for the GTA, not just the city of Toronto. If we take just the 416 numbers, then volume is up more than 31% and prices over 11%. Average sale price is over $430k. The 905 is doing well, but the downtown area is white hot these days.
“It certainly is surprising to see prices at that level,” said housing analyst Will Dunning.
Comment: Maybe to the experts, but those of us in the trenches are not surprised. I have been predicting this sort of activity for months now. Read back, it is all on the record.
Experts say higher priced homes in the Toronto market have helped to skew prices upward. The relative strength in the financial services sector has also helped, said Dunning.
Comment: Aren’t we talking about the Toronto market? How can the Toronto numbers skew the Toronto numbers? That does not make any sense at all. If they mean the Toronto numbers are skewing the GTA numbers, then fine. But the 905 saw a 25% sales increase and a 10% price increase. How are those numbers being skewed?
“There is a lot more confidence in financial services and this would affect higher-end neighbourhoods in terms of sales,” said the analyst.
Toronto real estate continues to be hot in September
Another reason has been a dearth of listings. Active listings were down significantly in September by 42% to 15,894. That has meant buyers are competing for less product on the market, which has led to bidding wars in some neighbourhoods such as Willowdale.
Comment: As I said, can you imagine how many houses would sell if listings were up? I know I would have a lot more sales this year… But it is putting huge upward pressure on prices. People jump on properties as soon as they see them, offering list price or close to it. And somewhere around 15% of places are selling in bidding wars – which is sure to drive prices upwards.
The average home is now on the market for 27 days, down from 36 days last year.
Creating an auction mentality for homes is not popular with buyers who feel that they have wasted their time looking at a property they can’t afford.
The controversial practice – of putting a lower than market value list price on the property – has been a common sales tactic in the Toronto area for the past several years.
But Thom said the auction strategy only works in a market where listings are down and buyers are starved for product. “If you had tried this last November, you would have been killed. Nobody would have showed up,” he says.
Comment: Yet people did it anyway. There are some agents who do nothing but. There are some properties that need time to ensure all interested parties get a chance to see it. But to make an offer date on any old place, on every listing. Come one, that is just stupid.
Only one offer came in at list price. All the other offers were for higher than list, he says.
The home, which has a 28-foot frontage, had been a rental for at least 10 years and needed “tender loving care” said Thom. The new owners plan to renovate the home.
Much of the unexpectedly high activity in the Toronto market has to do with the magic of low interest rates, where five-year fixed mortgages can be had for less than 4 per cent.
Comment: That is simply untrue. Rates were as much as 2% higher in 2007 than the best rates today. And that year saw many records set. Ten years ago rates were almost double what they are now, and that was 3 years into this upward march. When I bought my first place in 1999, I got a 8.25% and yet I still bought. As did all of my neighbours. The interest rate argument is total bunk.
“Clearly the way the market has come back has been a surprise,” says Benjamin Tal, senior economist at CIBC World Markets. “The question still remains though as to how sustainable are these sales figures?”
Comment: Since the “experts” have been asking that question for 5-6 years now, the answer is that they are obviously very sustainable.
Most analysts now expect this year to surpass last year in terms of sales. Year-to-date sales are up 4.5% in the first nine months of 2009 compared with the same period last year.
Comment: And that is with the dismal (-50%) January we had, plus the crappy later winter. We should be at least 5% better than 2008 by the end of the year.
However, economists such as Tal expect the market to cool in 2010.
Comment: Yeah, and they expected 2009 to be crappy too.
“The numbers are unsustainable and inconsistent with where we’re at in the economy,” said Tal. “Because of the low interest rates, buyers are purchasing their homes now instead of next year, so we are taking away sales from the future.”
Comment: Horses**t. These are the people who were scared to buy at the beginning of the year. All the sales that did not happen during the crisis are happening now. These are not being pulled forward, they are catching up from before. And with listings so low, there is more and more pent up demand. That is what you will say next year when the numbers are good, that the sales are not sustainable because it is just pent up demand.
Tal says this isn’t necessarily a bad thing. Low interest rates were designed to stimulate the market now so as to give a lift to the moribund economy.
But the economist cautioned that borrowers have a responsibility to make sure they are buying within their means.
“In five years from now when interest rates are three percentage points higher, you have to ask whether you can still afford that property,” cautions Tal. “For some people, that might be a big no.”
Comment: Except rates will not be 3% higher. The last time rates were 3% higher was July of 2000. Two percent is possible, sure. But that is in 5 years. If you pay down your mortgage for 5 years, then that increase will mean that your payments are the same as they are now. If your mortgage is $400,000 at 3.99% right now, and it goes up to 6.04% in 5 years and you still owe $350,000 then your payments increase $140. I do not think that will cause most people to default or have to fire-sale their home. And that is only if rates go up 2.05%. Do the math for yourself, do not trust the doomsdayers!
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Contact the Jeffrey Team for more information - 416-388-1960
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