Real estate in the Greater Toronto Area has been in a seller's market for most of the last decade. In fact, a very strong seller's market for the last couple of years.
With housing supply and affordability at the forefront of news and political discussions, it is no secret that prices have skyrocketed to historic highs over the past few years.
Add low interest rates and a construction industry that cannot keep up with demand, and we have the perfect storm for buyer competition on homes that do hit the market.
I expect that my position on this issue may strike a nerve with some agents. It may also have the same effect with consumers, but we don't make progress on contentious issues without dialogue.
The de-facto strategy for many real estate agents in this market has been to price most properties at a point well below the selling price of recent, comparable sales. They also set a fixed date for offers to be submitted, with the clear expectation that there will be multiple, typically unconditional, offers - well above that list price.
Setting the initial list price at their expected selling point would have the effect of making the listing appear overpriced (compared to similar, underpriced homes) and reduce both showing traffic and the potential for multiple offers.
Thus, when the typical listing sells, it sells for a large premium to the list price of the home. Yet, it is very common to see agents putting up signage, social media posts and advertising that proclaims that the home sold "over asking".
Were most of these claims of listings being sold over asking legitimate?
In some cases, yes. Take, for example, a case where an agent worked with a seller to price a property, and they decided to list it in-line with the selling price of recent comparable properties.
This is a reasonable strategy when a property is in a price range well above market averages, or has limited uses for a typical buyer (like a farm or a large parcel of vacant land). In those cases, it is also much less likely that the property would be listed with a fixed offer date.
In those cases, it is fair to claim that the property was sold over asking, should that outcome happen.
On the other hand, when an agent has applied a strategy to list well below comparable market price and held offers to a specific date, using the term "sold above asking" seems very misleading after the fact. Their plan made it very clear that the list price was not an 'asking' price.
Even more so when they embellish the phrase by adding more. There are custom-made signs bragging "SOLD 250K ABOVE ASKING!!!" or "SOLD 15% ABOVE ASKING!" all over the GTA, when the selling prices were similar to other listings. Making the extra effort to emphasize the enormity of the result just makes the statement appear more deceptive.
It would be much more transparent if they used the phrase "sold above list", which is more appropriate in the vast majority of listings. It would also be acceptable to compare the result to other sales, if they explained how their outcome was better than others.
I would like to see our industry do better with the way it markets sold listings. I don't believe that most agents intend to mislead the public, but it may take some effort to collectively get us to a place where we better communicate our accomplishments to the public.
Perhaps it will take some involvement by either the Ontario Real Estate Association or the Real Estate Coucil of Ontario to establish some guidance on what is acceptable in the current market.
Do you agree with me? Please leave a comment below.