Is A Wolf In Sheep’s Clothing At Your Door? Find Out Why Toronto Buyers Avoid The Underpriced Listing
September 1st, 2008 Categories: First-Time Home Buyers, Home Buyers, News Wire
Knock, Knock! Who’s there? An underpriced listing that may appear to be in your price range but isn’t! Care to make an offer?
Wow! If navigating the Toronto real estate market were only made that simple for buyers. Or IS it??
Underpriced Listings Aggravate
Toronto Real Estate Market
Unless you’ve been “off the grid” this summer, you’re probably aware there’s some … tense … feelings in the Toronto real estate market with respect to the practice of blatantly underlisting properties with the intent to generate fierce bidding wars. Although this marketing strategy has been kicking around for several years, it would appear that a cooling market has caused many real estate agents and buyers to question the merits of such a strategy; specifically, to suggest that the practice is a waste of time for both buyers and sellers, possibly detrimental to both (but especially to buyers!), harmful to the real estate industry, and so on. But I think what’s really being asked is: why won’t this practice go away, especially in light of excess inventory and statistics that point to a buyer’s market?
Are Toronto Buyers
Really That Gullible?
There are many Toronto home buyers who can attest to the fact that it’s no fun being on the losing end of a string of multiple bids. But buyers also know there’s always the possibility to be the successful bidder as long as they’re bidding on houses that are actually in their price range.
I find it hard to believe what I’m hearing these days: that there are lots of buyers being taken in by the underpriced listing, over and over again. Why? Because Toronto real estate agents (should) 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 strategy is just so transparent and easy to detect.
Which tells me that most buyers aren’t being fooled at all by the Toronto real estate market’s version of the proverbial wolf in sheep’s clothing.
Why Toronto Buyers
Ignore Underpriced Listings
That being said, I do understand how alluring the underpriced listing can be to buyers. I can see why buyers are tempted. The thought that there’s even the slightest chance to get into your most-desired neighbourhood can be hard to resist.
But think very carefully as to whether you want to be part of the buying circus for the underpriced listing that is, in fact, out of your price range. Think about your role and what you can expect to get for your efforts. Which is nothing.
Consider the following:
The list price is merely a tease intended to generate a buzz that will, in turn, generate lots of competing bids. A simple check of recent solds in the neighbourhood will be a very good indicator as to whether this listing is out of your price range.
By taking your valuable time to view the house, pay for a home inspection, arrange for financing, register an offer, and show up at the house to present at the time prescribed, you’ve created just the buzz this marketing strategy is intended to produce. That’s very thoughty of you!
The crowd scene at the offer presentation can further juice the competitive nature of many buyers. No one knows which buyer can’t afford to buy bubble gum, or who’s fabulously wealthy with a real estate acquisition addiction. But when face-to-face with the competition, monied buyers can dig deep and beat their own best offers prior to presentation. They’ll certainly best yours.
The successful buyer who is on the winning end of a heated bidding war knows that the seriously-underpriced listing is not what it appears. They see it for exactly what it is, they are well informed as to recent selling prices for comparable properties, and are in a financial position to make a competitive offer. They go to the table to win.
When all is said and done, you’ll be happy to know (won’t you??) that you’ve provided a very valuable service to the seller (that being the buzz), one for which you will receive no thanks or consideration. Ouch!!
I’m not seeing any upside for the buyer in this scenario. Do you really want to play into this strategy? How much free marketing buzz are you willing to provide? How many disappointments can you take? And given the Toronto real estate market’s excess inventory, what opportunities are slipping by while you chase unattainable listings?
There’s a lot to be said for the old adage, “Fool me once, shame on you, fool me twice, shame on me.”
Savvy Toronto
Buyers Bid To Buy
Here’s my suggestion to serious buyers: Let’s look at homes in your price range, find one you like and make a competitive offer. No guarantees you won’t end up in a bidding war, but savvy buyers know if not this one, then the next. If the one you like is overpriced, I’ll find out if the seller is willing to negotiate a fair price, and if not we’ll move on. If they’re underpriced but the market indicates the listing will sell in your price range, we’ll negotiate.
And here’s the upside for you in this scenario: your efforts will benefit YOU. Now that’s happy house hunting!
You CAN buy and sell successfully in today’s Toronto real estate market. Call Lauren at 416–550–6991 to find out how. I know a wolf when I see one!
Thanks for the heads up. We have not yet seen this in Honolulu, but I will be on the watch.
Aloha,
Keahi
Good advice, Lauren. I always tell prospective homeowners to keep their expectations realistic. Many agents try to influence their clients to pick at properties that are above their price range, but end up wasting time and energy. That said, you never know what can happen, especially given the difficult market, so you shouldn’t completely avoid properties out of your range - you just need to know your limits and buy what you can afford.