Say you’d been searching for a condo to buy and handed over an offer on a cool place in the Queen Street West area, only to find out that the owner rejected not just your offer but every one of the 15 others. You’d feel irked, right? And just imagine how burned you would feel if the same seller came back to the market for another round – at a higher price.
David Fleming understands the outrage.
The agent at Bosley Real Estate Ltd. has seen this scenario play out more often than usual 2012’s exceptionally hot spring market in Toronto: Sellers angle for a bidding war; if competition doesn’t materialize or the bids aren’t rich enough, they wait a short interval then raise the asking price.
“Expectations are crazy right now,” he says.
Mr. Fleming – who draws readers who like his outspoken style at torontorealtyblog.com – closely followed one such case which played out recently as the market was heading toward the peak of the spring frenzy.
The action unfolded after a condo unit with one bedroom and a den had languished on the market for seven weeks with an asking price of just under $360,000. The building had been recently registered which meant that owners were entitled to put their units up for sale and dozens of them did so over the course of a few months.
So, in order to make this one unit stand out from the competition, Mr. Fleming reckons, the seller and his or her agent tried a new tactic.
They brought out the listing again at the eye-popping asking price of $159,900. They set a date and time when all offers would be reviewed and waited for the fracas to ensue.
Mr. Fleming ranted (his word) about the outcome on his blog: After all 16 parties put their bids on the table, not one had upped the ante sufficiently to satisfy the seller.
A few weeks passed and the unit was listed once again – at a little less than $359,000 this time. It’s not hard to imagine that the seller was hoping for this amount all along and the ridiculously-low asking price was just bait.
“All they did was waste the time of not just the 16 buyers, but also the agents, lawyers, parents, mortgage brokers and everyone else involved.”
Then there are the frazzled nerves that buyers suffer in such skirmishes.
Many of those bidders probably offered huge amounts over the asking price, he says, and they would undoubtedly feel deceived.
Mr. Fleming stresses that the seller and agent did nothing illegal or even against industry rules. But he does think their actions were misleading. He rails against game-playing because he says it tarnishes the reputation of the industry.
“It’s very frustrating for everyone involved,” he says. “It makes people not want to work with that agent. It makes people not want to look at the house.”
The seller’s agent, he adds, should not try to appeal to a client’s greed. Some people are cashing out after living in a place a long time but others only bought a couple of years ago. Everyone seems to expect a big gain, says Mr. Fleming.
“I think it really falls back on the listing agent to educate their sellers and not promise them multiples. The sellers’ expectations are so high and emotion pays a huge part in real estate.”
But perhaps prospective buyers bear some responsibility: they can walk away and refuse to participate in a melée.
“You really, really have to consider, do you want to get involved,” Mr. Fleming agrees. “When you know a game is being played, I would advise my clients to sit it out.”
Mr. Fleming says the rising number of listings at this time of year compared with the shortage in February means competition is less intense. Multiple offers are still common for good properties in favoured neighbourhoods, he adds, but the battles that draw 13 or 15 buyers have simmered down.
Many agents are reporting that they’ve seen offer dates pass without a deal. That’s when a strategy designed to draw multiple offers can backfire.
When that happens, it’s not uncommon to see the same house come back on at a higher price.
“If your house didn’t sell at $999,000, why would you put it back on for $1.1-million? The market has spoken.”
The sellers will often try to justify the higher asking price by pointing out improvements they’ve made, such as redoing the kitchen.
“And even that was probably 10 years ago,” says Mr. Fleming. “No one cares about your 10-year-old kitchen.”
In other cases, a house doesn’t sell at the deadline and a prospective buyer will make an offer later for the asking price or thereabouts only to have the seller come back with a higher number.
“When they sign back higher than the asking price – what are they thinking? That was three weeks ago.”
Let The Next Move know what you think: Would you feel betrayed if you joined a round of bidding and the seller ultimately turned all buyers away? Or is it fair game: sellers have the choice to list their house for sale with no obligation to strike a deal?