Doesn’t that just get everyone’s blood boiling? You all know what I’m talking about. It’s the little bungalow in Mimico that made headlines in January.
If you haven’t heard, the story is about a run down 1200 sq ft property that sparked a 31 person bidding war. Nothing special, nothing that really deserved 31 people fighting over it.
If I could sum up the whole debacle in one word, I would call it disgraceful.
Madame Toastmaster, Fellow Toastmasters, Welcomed Guests,
Before you start pulling out your hair, know this: Real estate prices have not shot up 150% over night.
So how could something like this happen?
It’s the result of an unethical, uneducated, and disrespectful tactic put forward by the Seller and the Real Estate Agent who listed the property for sale.
Here is the secret that no one else will tell you.
The little bungalow in Mimico was $200,000 underpriced to begin with. A mere tactic to lure in some unsuspecting Buyers.
The tactic goes like this:
- Listing agent meets with Seller of a $600,000 property.
- Listing agent may or may not know the market value of the house, convinces the Seller to list for $200,000 less than what the true value is.
- Listing agent counts on naïve Buyers to throw in offers, and eventually arrive at a sales price that is 150% over asking.
I’ve been in the real estate business long enough to know this is wrong.
1. It’s unethical. The Real Estate Council of Ontario has distinct rules about this type of practice. What has been demonstrated here is false advertising. The Seller never had any intention of selling a $600,000 property for $400,000. It’s illegal for Starbucks to advertise a $4 latte, and charge you $6 at the counter. Why isn’t it illegal in real estate?
2. It’s uneducated. I’ve had conversations with my colleagues and we wonder if perhaps the agent didn’t even know how to determine the market value. The most difficult job for a listing agent is to price a house. It’s a moving target, and it takes experience to get it right. If you list too high, you’ll scare off a large pool of Buyers. If you price too low, you may be leaving money on the table. A knowledgeable listing agent would apply the market conditions, competitive listings, and strategy to determine the listing price.
3. It’s disrespectful. To pull in 30 Buyers into a what is basically a game, shows exactly how little regard the listing agent had for people’s time and emotions.
To add fuel to the fire, the listing agent double ended the deal, which basically means he cheated. First he reviewed all 30 offers with the Seller. Then he called the 31st Buyer – his own client – and let him know the highest offer on the table is $600,000. If his Buyer client wants the property, all he needs to do is add a $1 to the highest bid and he’ll come out the winner. Whether or not his Buyer client’s offer was $1 higher or $1,000 higher, we’ll never know. The point is his own client had an unfair advantage and the listing agent was motivated to play unethically because if he can double end the deal, he can double his commission.
So what happened to the 30 other bidders? They walked away stressed out, defeated, and broken hearted.
There will be mixed feelings in the room after this speech. Some of you will be completely appalled and sympathetic towards the 30 poor bidders left with nothing. Some of you might think a listing agent should do everything in his power to get the maximum price for his Seller. Fair enough.
There’s only one thing I want you to remember, and it’s that there’s a right way and a wrong way of doing business.
When you conduct yourself in a manner that’s unethical, uneducated, and disrespectful – it’s the wrong way.
In my opinion, I think the Seller and Listing Agent could have obtained the same financial outcome without the dramatic misleading scheme.
The lesson I want you to take away is for the potential Buyer.
If you ever find yourself in this position – where you’re up against 30 or so bidders – do your research. Find out what similar houses on the street have sold for. If you know ahead of time the house is worth around $600,000, you won’t waste your time or emotional well being offering anything less.
Disclaimer: The preceding commentary is the opinion of Hanna Stecewicz and does not represent the interests or opinions of Right at Home Realty Inc., Brokerage or the Toronto Real Estate Board. Therefore, Right at Home Realty will not be held responsible and/or liable for any of the opinions herein.