Another Day, Another Dollar: Toronto Real Estate Market Endures Another Loonie Listing
April 23rd, 2008 Categories: Home Buyers, Home Sellers, News Wire
Did you happen to catch the local news last Friday evening? If so, you’ve probably heard about the Toronto home owner who is trying to sell his Toronto Riverdale house that is listed for one dollar. That’s right, one dollar. This story caught my amused attention, not because I haven’t seen this “list for one dollar, sell for a million” marketing strategy before, but because it’s resurfacing in a real estate market that just might give it the cold shoulder.
But, you say, this story is generating a buzz! The “list for one dollar” strategy has focused a lot of attention on the sale of this property. There must be some merit to this approach. What’s not to love??
Quite a bit, actually!
Is The “$1 Listing” Sound Marketing
Strategy For Toronto Real Estate Market?
It’s no surprise that Toronto home owners seek a competitive advantage when selling their homes. And if the “list for one dollar” strategy has the potential to deliver the client’s desired results (read: lots of money), shouldn’t it be considered a bona fide strategy used to sell houses in the Toronto 2008 real estate market? Should Toronto real estate agents recommend this approach to their clients?
No, no, no! Even if this strategy occasionally pays off, I strongly recommend you avoid this ploy at all costs. It’s risky, tacky (there, I’ve said it!) and oh-so-transparent.
And here’s why …
It’s been done before and with not-so-great results. A quick check of the Toronto MLS shows these listings are often terminated or suspended. If this strategy wasn’t embraced when the Toronto real estate market was super hot, what are its chances of success today? And what a waste of time; think of all the qualified buyers who bought elsewhere rather than negotiate this type of offer, and the sellers who were aggravated with lowball offers (really, you were expecting something else?).
The Toronto 2008 real estate market is in transition. Coming off its best year ever in 2007, the numbers are cooling. Based on the mid-April statistics it would appear that for now buyers are on the sidelines; they are showing signs of reluctance to write those offers. The buyers who are out looking are doing just that: looking. Even though this may just be the time to get out there and find an affordable house in a good-but-not-hot-area while interest rates are dropping and your buyer competition waits for the Toronto real estate apocalypse.
Are these the buyers who are going to pile on a multiple-bid scrum, especially one where the seller is “coy” about what price would be considered a reasonable offer or at least a reasonable starting point? Buyers are very wary about overpaying in a market that they believe may be about to dip or correct. It’s one thing to be overextended in the early days of a rising market; it’s quite another to overextend yourself at what may just be the peak. Why would a seller adopt a strategy that makes potential buyers uncomfortable and thus unlikely to come to the table?
Toronto Home Buyers
Avoid The Dork Flag
I think it’s safe to say that many Toronto home buyers are a little weary of the market. It’s become the baby you love but find hard to like. Think about it: price appreciation, losing bids, phantom bids, listings at well under market value (a close relative of the $1 listing), alarming home inspections, and on and on.
And then there’s the dork flag. Ah, the dork flag; not something a Toronto home owner should be flying when it comes time to sell their house. It can take on many different appearances but trust me, Toronto home buyers and their real estate agents know it when they see it. And avoid it they will, especially in this market.
So, what makes the “list for one dollar” strategy a dork flag? For me, it’s all about transparency. In this scenario, the seller typically makes noises about wanting to generate a buzz (fair enough) and letting the market decide the value of the house. And that’s where it all falls down.
It’s never a matter of letting the market decide value; the market will always determine value over time. It’s no secret that this strategy is intended to deliver buzz, bids and bucks. And buyers know this, especially those that have been on the losing end of a string of multiple bids. When expectations are set unrealistically high by this strategy, what are the chances that the seller will be willing to negotiate when the market brings an offer that doesn’t dazzle but reflects what it will bear? Are they willing to defer to the market? Exactly.
Fewer buyers want to play that game these days. And although it might not be seen that often in Toronto’s hot real estate pockets, there are many buyers who will not deal with sellers they believe will be unreasonable or inflexible in negotiations. Just as home sellers do not wish to tie up their properties with conditions if they believe the buyers are not serious, the same goes for buyers who don’t want to waste precious time negotiating with sellers who are elusive with their price.
It will be interesting to see what happens with Toronto’s latest $1 listing. Anyone care to make a prediction?
I had seen this article and referenced it in a post of mine also. I like your label, “the dork flag” and you are right, the Seller has a price in mind, period. This is a marketing tactic, but if Toronto’s market is experiencing a cool down anything similar to some of the markets across the U.S, then I don’t think this seller will find that real estate buyers are willing to play this game solely on his terms.
Rebecca,
Buyers easily see the $1 list price strategy for what it is: a teaser that hints at the possibility of buying for under market value which will generate lots of interest, thereby ensuring fiercely competitive bids.
Even in hot areas of the city it can’t be assumed that buyers will automatically come to the table, especially in a cooling market.
As being a Toronto real estate agent I must say that tactics are not really working on that market. Obviously this was doomed to failure. One should state an objective price which is enough when it goes through the negotiating and the buyer can still feel he benefits from the deal. That`s a very common recipe and I think that being frank and smart all the time is the best way to achieve your goal.
Elli,
“Guess how much money I want for my house” isn’t a popular game and certainly causes the seller to lose sight of their goal.
I have not seen this one in Honolulu…yet. You make excellent points. Good job.
Aloha,
Keahi
Keahi,
Hope this one doesn’t ride in on a big wave! It’s interesting; we’re in the same business but each market has its own unique personality.
I laughed when I saw the mls lising….personally I feel the holding off offers strategy will even dissinegrate. You are right, buyers in this type of market are not interested in playing the games and bidding wars of the crazy market in the past..I feel the market is in a balancing state. Let’s face it, this streak could not have possibly gone on forever, and since it appears we have come to balanced scenario the $1 guy looks like an un-informed peron..a nicer way of saying dork
Aly,
Thanks for your comments, and be sure to check back as I will be writing about other bid strategies such as holding offers.
[…] The move has created a buzz as it made the evening news in Toronto and here I am blogging about it. Read the entire post and you will see that the Blogger makes some good points as to why this might not be the best plan. […]
[…] In May 2008, inventory increased to 27,267 listings, a 15% increase over last year at this time. Although not what the Toronto home seller wants to hear, potential buyers now have more listings to consider, an opportunity to actually make offers, and possibly fewer listings that go for over asking. No doubt a welcome break for weary Toronto home buyers. […]
[…] see the obviously underpriced listing for what it is: a marketing strategy intended to deliver buzz, bids and bucks. Because so many buyers are educated about the market and/or “how life works”. Because this […]