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Tag Archives: underpricing of properties

Real Estate Council aims to ease bidding wars

New public education campaign doesn’t address realtor practices.

Susan Pigg – Toronto Star

The Real Estate Council of Ontario has launched a new public education campaign aimed at curbing bidding wars by warning buyers not to be overly influenced by emotion when purchasing a home.

The regulatory body has no plans, however, to probe whether the practices of the realtors it regulates are contributing to the escalating problem of bidding wars, especially in the Toronto market, says RECO registrar Joe Richer.

Comment: Um, what? Why are we being blamed again? The problem is due mainly to a drastic shortage of listings. When there is only one house for sale in a given district and 32 people go after it, that has nothing to do with realtor practices. Maybe listing agents price things low, but it is the vast crowd of buyers and bidders that push the price up. The starting price does not have as much to do with the sale price as the number of bidders. Or maybe it is sellers being greedy, has anyone thought of that? They know they have something in short supply and they pressure their agents to get them as much as possible for the sale of their property. But no, so much easier to just blame the bad and crooked and deceitful real estate agents.

Such practices include the drastic underpricing of properties to draw bigger crowds, and holding back considering offers for six to eight days. Increasingly frustrated, angry buyers complain those tactics are leaving them further disadvantaged in the face of a sellers’ market compounded by sales listings that have fallen far short of demand.

Comment: Of course, because every single offer hold back and bidding war is the agent’s idea. No seller has ever thought of that, asked for that… demanded that.

Bidding war in Toronto
“Our focus is on taking as much of the emotion out of the transaction as possible,” says Richer, pointing to a recent survey of 505 Ontario homeowners done for RECO by pollster Angus Reid.

It shows that 51% of those surveyed admit to having been influenced by emotion when buying their home, a number that jumps to 64% among owners aged 18 to 34.

While only 15% of those surveyed said they went over budget and over asking price to get a home, that number jumps to 25% among home buyers age 34 and under.

Comment: But none of that factors into bidding wars and high sale prices, no emotion or buyers going over budget. It is all realtors’ fault.

“Despite the fact that Ontarians are fairly home smart, we’re seeing more and more people — especially younger home buyers — getting swept up in the frenzied market, making emotional decisions they could later regret,” says Richer. He says that multiple bidding is rare outside of Toronto.

The campaign, which features a “choose your home adventure Facebook game,” an “are you home smart or home emotional quiz” and a home buying and selling checklist, is aimed at arming buyers with the tools to make rational, smart decisions, says Richer.

Ironically, the campaign was prompted by complaints from parents, not young buyers.

“We’ve had a number of people say, ‘My kid has gone out and overspent (on a house), how do we get out of this?’,” said Richer in an interview.

Comment: So talk to your kids first, don’t complain after. Not that I did, I told my folks AFTER I bought my first house. In hindsight, I should have told them first, they might have helped with the down payment!

“It’s difficult for us to give advice, other than to say you need to go talk to your lawyer and see what you can do.”

Richer is growing concerned that young buyers may not be doing enough homework before putting in offers that could leave them financially crippled.

RECO could do far more to ensure properties aren’t purposely priced to stimulate bidding wars, says Toronto house-hunter Jason Brander, 29, a city planner who recently lost out on two bidding wars in the east end.

Comment: Why? What does that have to do with anything? Buying agents need to educate their clients, just because a house is priced for $XXX,xxx doesn’t it won’t sell $100,000 more. And buyers need to LISTEN to their agents. Don’t ask them to make an offer “just in case” or to “see what happens”. When 10 or 20 buyers do that, suddenly 12 offers becomes 32 and the sale price is pushed up by $50,000 or more.

Realtors counter that they are often being told to underprice properties by sellers, who see such tactics paying off elsewhere.

Comment: And we are beholden to our clients to do what they ask us to do.

Brander is in the process of filing a complaint with RECO after finding out the winner among nine bidders on his most recent loss was the client of the same agent who listed the home for sale.

Comment: There is nothing wrong with that at all. It is not illegal or unethical. As long as everyone was told beforehand. Sounds like a bad loser to me.

“Something needs to be done to improve the transparency of the process,” says Brander. He was shocked to find out the agent had no other member of her office, or an independent realtor, sitting in on bids when she was representing both seller and a buyer, a process known in the industry as “double ending.”

Comment: Again, that is not necessary. A good idea, yes, but not required.

Richer says RECO hasn’t taken any “formal look” at how pricing and other realtor practices may be factors in the recent bidding war frenzy, which has been especially pronounced in some east-end neighbourhoods along the Danforth subway line, and the council has no plans to do so.

Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.