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This Shady Listing Strategy is Borderline False Advertising

This Shady Listing Strategy is Borderline False Advertising

Oct 27, 2017
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There was a recent condo listing in the Queen West neighbourhood that caught our attention. You may have seen it. You may have called your Condo Pro in hopes of learning more and placing an offer. But it’s doubtful you won the bid, very doubtful. That’s because this Queen West condo listing was never meant for you, never meant for all the first-time buyers that it attracted. This condo listing was a shady piece of listing strategy designed to cause a bidding war to end all bidding wars, and we’re not impressed.

The recent Queen West condo was listed at $328,888 for 796 SQFT in a building that averages $645 PSF, in a neighbourhood with asking prices in the $900s.

Shady Toronto real estate

Shady Toronto real estate

Shady Toronto real estate story

Shady Toronto real estate story

How is this a shady listing strategy?

We’ve talked about real unethical Realtor practices before, but this is different.

This particular unit was listed for $184,532 below its market value, moving it from the $500s into the $300s. That might not seem like a big deal, but it is for buyers in the $300k market.

It’s a fair and normal strategy to list a unit below market value to increase demand. We often see listings that are 3-5% below market value, but 35-40% is absurd. When the asking price is so far below the actual market price there is a problem. As a listing strategy, it blurs the boundaries of opportunity for buyers, and it’s just bad form.

“The frustration is that this kind of practice is just fishing,” said Andrew Harrild, VP of Sales at Condos.ca—one of many agents that received phone calls from distressed clients. “Listing a unit this far below market value, especially in the first-time buyer range, is a waste of people’s time. It gives people false hope. It’s essentially false advertising.”

Many first-time buyers and some downsizers cannot afford a purchase in the $500s. They are looking in the $300s to find a real opportunity. If they find a unit in a good building, in a neighbourhood they like, they will see a great opportunity, even a dream come true. But what happens when they discover the asking price was nothing but a bidding-war inducement?

People will feel cheated and confused. This type of behaviour makes people lose faith in the real estate industry in general, and it adds a lot of stress to an already stressful environment. It's behaviour like this that gives the real estate industry a bad rap.

How to avoid shady real estate strategies

As a seller, it’s important to be aware of what your listing agent is doing. There are a variety of selling strategies out there. Obviously, it’s a competitive range, but some strategies take advantage of the competitive nature of real estate and wind up in ethically-questionable territory. Knowing the value and the sales history of your unit and building is key to knowing whether you listing agent is playing fair. At the end of the day, employing an unfair realtor isn’t doing you, the seller, any favours.

As a buyer, you need to be prepared for situations like these. What does ‘being prepared’ mean? It means recognizing that real estate can be fraught with set-backs. In a business that deals with one of the biggest, happiest purchases of a person’s life it’s only understandable that there is an equal opportunity for big disappointment.

Being prepared also means being informed and educated on current market values. Not general stuff, but the real specifics of unit and building values in price-per-square-foot terms.

The value of price-per-square foot analysis cannot be ignored. If every hopeful buyer that viewed this recent Queen West condo listing had taken a more thorough look at the PSF analysis on Condos.ca, they would have seen that a 796 SQFT unit in a building that averages $645 PSF was drastically under-priced at $413 PSF. They would have known something was up, and that it was time to call their Condo Pro, not to view the unit, not to place an offer, but to find out what the price discrepancy was all about.

The ability for every buyer and every seller to be prepared in real estate is at their fingertips with price-per-square-foot analysis.