What Does List Price Mean This Fall?

Business

8 minute read

October 15, 2020

A few months ago, I received a phone call from a Toronto reporter who asked me a question that I simply could not answer:

“When did the business of ‘holding back offers’ begin, and who started it?”

I mean, that’s like asking who invented the Internet.  Well, so long as you don’t ask Al Gore…

She went on to say that she had the idea for a story about the origin of this real estate phenomenon that we all take for granted today, but that wasn’t always commonplace.

I started in real estate in 2004 and this was merely the way things worked.

Not every listing, but most.

A $1,500,000 listing, in 2004, would almost never come with an “offer night.”  Granted, a $1.5M property in 2004 is close to $3M today, so viewing things on a relative basis, you wouldn’t expect a $3M house to have an “offer night” today, would you?”

But aside from the number of listings which had set offer dates, which was far fewer in 2004, there was an even larger difference between 2004 and 2020: houses didn’t sell nearly as high over list.

A bungalow in Leaside, listed for $399,900, might have received six offers but only sold for $430,000.  As a percentage, it’s more than it sounds.  This is the equivalent of a $1,199,000 listing selling for $1,320,000 today.  But back then, houses received far fewer offers, and the over-asking premium was smaller.

Even when there were a huge number of offers, the premium was still small.  I remember bidding on condos in a hot market in the summer of 2006.  Listings at $299,900, receiving eight offers and only selling for $331,000.  That’s ten percent above list, but imagine the number of offers that were at the same price, or close to it?

And imagine the bid increments?

Today, when you bid on a $799,900 listing, with your $1,010,000 offer, and are told “You’re in the top two offers, out of eight, please improve your offer, if you’d like,” you may choose to go up $25,000 to $1,035,000 to secure the property, maybe more.

But when you had bid $322,000 on that $299,900 listing, what did you do?  Go to $326,000?

Yup.

I was there.  I worked in this market, and I worked within those price points.  I remember going from $760,000 to $768,000 on a Riverdale house, and winning.

There was one other feature of this market that we did not see back then, that we’re accustomed to seeing today: the re-listing.  The failed offer nights.  The houses that don’t get any action on offer night, but then sell for oodles more days later.

Is this because the process has been refined?  Are the players smarter?  Dumber?  What’s the difference?

Well, for starters, I would say that the stakes are higher.  But I would also say that agents have learned throughout the last two decades, and now have built-in backup plans.  Then there’s the fact that the good agents in 2020 are simply that much better than the good agents in 2004.

As an example, try this one on for size…

A colleague of mine from another brokerage sold a listing of hers for 118% of the list price, without any competition.

And, she did it after the offer night.

What gives?

Her property came onto the market for $799,900, with an offer date scheduled seven days later.  This is nothing new, of course.  In the freehold market, we almost come to expect this.

Showings were plentiful through the seven days, and expectations were high.

But guess what?

Offer night came, and it was crickets.  Nothing!  No offers on the table; not even a bad one!

Now, did this mean that the property wasn’t worth $799,900?  Of course not.  It just meant that any interested buyer didn’t feel like being in competition, or was bidding on a different property that night, or wanted to take the “wait and see” approach.

The next day, the phone rang.  A few times, in fact.  Agents wanted to know!  “Did the property sell last night?” they all asked, most of them having planned this.

The listing agent told them all the same thing: “The property didn’t sell.  We will be re-listing in a couple of days at a new price, but we’re happy to look at an offer today if one came through.”

Low and behold, and offer did come through, and after much coaching by the listing agent, the offer for a whopping $940,000 was submitted and subsequently accepted.

This happens, from time to time.  Just because an under-listed property doesn’t get offers, doesn’t mean the seller is going to accept that list price, or below, or slightly above, or anything they don’t want to accept!  A good listing agent can spin this a dozen different ways and often get the property sold.

How about another story?  Perhaps one where the ink isn’t yet dry?

Last night, one of the agents on my team went to offer on an east-end listing, priced at $1,479,000.  I told him from the start, “This is a $1.65M house, all day.”

He told that to the buyer, and the buyer then used that magic word that drives me nuts in real estate: “hope.”

They hoped that there would be little competition, and in the end, there was even less than that; there was zero competition.

They had the only offer on the property and they proceeded with an offer of $1,541,000.

“Why would they bid more than the list price when there’s no competition,” many of you are asking.  Try not to fantasize here, remember.  The seller is under no obligation to accept any offer, even if it’s for a billion dollars.  And in the 2020 market, with a top listing agent representing that seller, there’s just no point in submitting an offer of the list price.

Sure enough, the listing agent told my colleague, “This isn’t going to work, we both know that.  We’re going to relist tomorrow at something like $1,649,000.”

Well that sucked!

But if it’s any consolation to the buyer, at least he knew that we had pegged the value, or if you don’t like ‘value’ then we had pegged the perceived fair market value.  Or call it the true list price.

The listing agent added, “I’ll get you a sign-back that will help us both.”

Famous last words.

The seller signed the offer back at $1,635,000, which basically said to the buyer, “We’re going to re-list higher than this tomorrow, but to secure a deal tonight, we’ll shave the price down a little.”

The buyer walked.

The property was re-listed for $1,649,000 today.

Now, this last story is an interesting one.

A condo was listed for $899,900 a couple of weeks ago, and I flagged it to keep an eye on for a client.  It was out of her range, but I loved this building, and I sent it to her and said, “If we can find something like this, just a bit cheaper, I’d be all over it.”

Only about ten or twelve days later, I saw a listing come out in the same building for $799,900.  “This is it,” I told myself.  Only, it wasn’t another listing, but rather the same one!

Re-listed a whopping $100,000 lower, after less than two weeks?

Alright.  Sure.

I took my client through, she Facetime’d her mother to get the approval, and we submitted an offer for $780,000.

It was worth every penny of the list price.  Hell, it was worth more!  But with no offers registered, and my client safely situated in a sweetheart rental deal for about half of market rent, she wasn’t in a hurry, and didn’t fear “losing” that which was not hers.

The listing agent was delightful, truly.  But won’t lie when I say that I was caught off guard by the signback: $845,000.

“My client is looking for substantially over the list price,” she told me.

I was so confused.

“You’re listed at $799,900 with ‘offers anytime’ according to the listing.  There’s no offer date on here,” I explained.

“Yes,” she said, “That’s because offer dates aren’t working!”

I remained confused.

“We listed at $899,900 but we only had one showing in ten days,” she told me.  “So we wanted to re-list, but we didn’t want to host an ‘offer night’ because that would drive buyers away.  So we’re just listed at $799,900, offers any time.”

“But you’re looking for more than the list price,” I said.

“Exactly,” she replied.

Well, shoot.  Sixteen years in this business, and what do I know?

Now we’re listing properties at prices we won’t actually consider, without an offer night?

The public was frustrated enough when we started under-listing with “holdbacks.”  How are they going to feel when they see this new trend?

My client went up to $800,000, which was all she could afford, but we weren’t able to do a deal.

And you know what?

The listing agent sold the condo!  Well over list!

Her strategy worked, and while unorthodox, and unpopular with the public it would be, the seller is likely singing the listing agent’s praises.

It’ll sure look odd when posted on MLS; a sale well over list, without an offer date.

Mind you, that over-asking premium, in lieu of an offer date, won’t look quite as odd as this one…

A client of mine who is looking in Mississauga recently sent me three listings of interest, and while two were around $2,500,000, one was suspiciously listed at $1,999,900.

I say “suspiciously” because it was just as large a house, just as nice a house, in the same geographic location, but listed for 20% less.

I checked the BROKERAGE REMARKS and, as with the condo I described above, this listing had no offer night scheduled, and the words “Offers Any Time” appeared.

Okay, then.

So are the sellers going to sell for $1,999,900?

No.  Of course not!

In fact, they were listed for $2,599,900 in early-September.

They were previously listed for $2,649,000, and before that, $2,699,000.

Suffice it to say, this house was not going to sell for $1,999,900 or below.

So why did they price it that way?  What makes them able to?  Why aren’t there repercussions for doing so?

All very good questions, if you feeling like asking.  And if you feel like venting, airing grievances, and cursing the name “Realtor” while you’re at it, I wouldn’t blame you.

Why did they price it that way?  “To get eyes on the listing,” the agent told me when I called to ask if they would consider $1,999,900, but only after he laughed into the phone and asked if I knew what I was doing.

Imagine that.  My mistake.

What makes them able to do this?  I suppose it’s just the way the system is set up.

Why aren’t there repercussions for doing so?  I honestly don’t know.  And when I write posts like this, I always get agents giving me flak, either because they don’t see anything wrong with misleading pricing, or because they do find fault with the method, but they feel me writing about it “makes us all look bad.”

Every once in a while, I’ll see a comment float onto TRB from an old post, whether it’s three months or eight years.  People love to talk about how “unfair” the pricing in real estate is, or how “criminal” the agents and brokerages are.  As with anything else in life, there are always extremes.

But I have commented, many times in the past, that there should be a ‘checkbox’ on the MLS listing for an offer night.  That’s an automatic way to show that the seller is under-listing strategically, holding back offers to a certain date, and from there, at least buyers are given some indication that the list price isn’t a true asking price.

The extreme folks would argue that this isn’t fair, but I have no issue with an auction format, starting bid, et al.  So long as it’s disclosed, not hidden, and not meant to intentionally mislead.

Listing a $2,500,000 property at $1,999,900 without any intention of ever considering an offer anywhere near that number is, in my opinion, false advertising.

But do not confuse this with the idea that a seller, upon receiving zero offers, one offer, two offers, et al, can’t simply say “forget this,” and reject all interest and offers, and re-list at a price of his or her choosing the next day.

The east side is littered with re-lists right now.  Some, the day after a failed offer night.  Some, the remnants of a disappointing summer.

No matter the area, price point, or property style, the list price of a piece of real estate this fall might mean less than it ever has before…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

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19 Comments

  1. Ed

    at 8:28 am

    List low with no offer date is just an evolution of the holdback with offer date.
    First there was a firm holdback, then bully offers, then soft holdbacks and now this.
    I can’t see how you can ‘knock it’ if it’s working in benefit of the client.

    1. Verbal Kint

      at 9:07 am

      David’s M.O. for years has been to underprice most of his listings, and then write blog postings making fun of the buyers and agents who showed up with an offer near list on the night. They should have known better, said he.

      1. David

        at 10:02 am

        Slight correction – David’s criticism is for realtors who show up at offer night, find out that there are 7 other offers registered, and then submit an offer for list price with 4 conditions.

        This was a property that was offers anytime, had been on the market for a while, and could have been a must-sell situation.

        1. Verbal Kint

          at 10:48 am

          David criticises them, but he loves them. If he didn’t want to deal with them, he could just price $20-2000k higher (depending on the property), and only attract serious buyers. He’d rather reel in seven offers, three of them serious, than only the top three. I don’t blame him — it gets higher prices.

          But to then dump on other agents for using a similar strategy when he gets cast as the fool? No class. And to request a checkmark on MLS that says “my list price is BS”? Laughable.

  2. Appraiser

    at 9:40 am

    Latest CREA Report:

    “Average house price continues to defy expectations, up 17% in past year” https://www.cbc.ca/news/business/crea-september-1.5763101

    “The average price of a home sold on the Canadian Real Estate Association’s MLS service went for $604,000 in September, an all-time record and an increase of more than 17 per cent in the past year.

    The group that represents 130,000 Canadian realtors says that in addition to smashing the previous record on the price side, it was also the busiest September ever in terms of the volume of homes sold, with an additional 20,000 transactions logged on top of the previous record.”

      1. Appraiser

        at 11:40 am

        Over-focusing on the downtown Toronto condominium market, to the exclusion of the rest of the country, makes one intellectually myopic.

        Discuss.

        1. Verbal Kint

          at 1:26 pm

          northbattlefordrealtyblog.com is over thataway. Your assignment is marked incomplete.

          1. Appraiser

            at 10:24 am

            Last I checked: downtownmicrocondoanecdotes.com is still available.

            You could start your very own blog.

          2. Verbal Kint

            at 2:49 pm

            Your original question was “Explain how it is that condo inventory went up this month while prices also went up,” here:
            https://torontorealtyblog.com/blog/deeper-dive-into-the-september-trreb-numbers/#comment-126601

            I explained why that was so, and pointed you to where in the data you could verify this for yourself. Now I’ve followed up with a press report complementing what I said the data shows and offering more evidence for the change in sales mix, but you dismiss it as anecdote, and try to change the subject to other markets.

            You’ve got access to the same data that I do. Ignoring it doesn’t change what it’s saying.

  3. Confused

    at 1:15 pm

    Is this practice legal? Why does the Competition Act not apply to these real estate transactions especially this section. I understand for cases where you don’t have a clean offer, you can argue that the monetary value of those conditions changes the value of the offer. However, that’s likely not the case for the large majority of offer night offers.

    “Section 74.05 of the Competition Act is a civil provision. It prohibits the sale or rent of a product at a price higher than its advertised price. The provision does not apply if the advertised price was a mistake and the error was immediately corrected.”

  4. Pragma

    at 2:59 pm

    Just passing by to provide updated numbers. Downtown condo rental listings were at 4500 less than 2 months ago. Currently sitting at 6700.

  5. Joel

    at 10:19 am

    It would be great if realtors all decided that if they want an offer night, the price ends in a 7 instead of a 9. This would give indication to everyone and would make the process more streamlined.

    Obviously this would never happen as it would take too much coordination, but would be useful to everyone if it could be followed.

  6. Appraiser

    at 9:31 am

    Trudeau Targets More Immigration Even With Borders All But Shut:

    “The Canadian government is sticking to its ambitious plans for bringing newcomers into the country, even as its borders remain essentially closed.

    Immigration Minister Marco Mendicino is leaning against scaling back the government’s immigration targets for the coming years, according to two people familiar with the matter. That includes bringing in 351,000 new permanent residents in 2021 — the most in a century. The government will update its three-year projections within the next month.”
    https://www.bloomberg.com/news/articles/2020-10-16/maintaining-robust-immigration-is-canada-s-big-post-pandemic-bet

    1. Chris

      at 10:07 am

      From the same article:

      “Sticking to that policy could be a challenge.

      Current travel restrictions and borders closures have sapped the flow of people into Canada. A high unemployment rate that looks likely to persist, and the fact Trudeau’s minority government must rely on support from opposition political parties to pass legislation, pose additional challenges.

      So far, the 2020 numbers aren’t even close.

      Between January and August, Canada admitted 128,430 permanent residents. If the flow returns to 2019 levels, that number will rise to 240,000, or about 70% of the target, according to Andrew Agopsowicz, an economist at Royal Bank of Canada. But even that may be optimistic.”

    2. Caprice

      at 3:32 pm

      So much for political suicide, eh Chris? 🙂

      1. Chris

        at 4:32 pm

        “A high unemployment rate that looks likely to persist, and the fact Trudeau’s minority government must rely on support from opposition political parties to pass legislation, pose additional challenges.”

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