In a HOT Seller's Market, Where is the Line Between Savvy Business and Sneaky Tactics?

In a recent Globe and Mail article Carolyn Ireland asks this very question and many agents (like myself) who have both buyer and seller clients are pondering a fair answer.  While, in many pockets in Toronto, it is currently normal to expect a listing to sell for over asking, some of the severely underpriced homes on the market can be misleading and frustrating to buyers.

For sellers who may want to draw as much interest as possible, or who list low expecting multiple offers (or, as many like to call these scenarios- bidding wars) and are disappointed when they don't see numbers as high as they had hoped, this strategy seems reasonable.  After all, it may be a great time to be a seller in Toronto but aren't we all just trying to make the most of our investments?

For buyers however, who may have already placed offers on other homes which were not acccepted, the thought that some of the properties on the market may be listed in a totally different price bracket may seem overwhelming.  Ireland's article seems to scoff at the fact that this obvious game playing is legal and accepted practice.

At one point, Ireland asks if a customer would expect to walk into a retail store and offer the proprietor the $2.99 posted price for a tube of toothpaste only to be told by the owner that, they were actually hoping for $3.45 since there are many customers and few tubes of toothpaste and they will not accept anything under $3.20?  Of course this sounds ridiculous but it works the other way as well: In a time of toothpaste abundance, a buyer would likely not expect to offer the shop owner $1.75, "take it or leave it" and make much progress.  Well, this is exactly what buyers expect in a real estate market which favours buyers so why shouldn't the reverse be acceptable for sellers?  In the end, this is a very important and large purchase for most people (unlike a tube of toothpaste) and is therefore very obviously subject to the laws of supply and demand.

My opinion?  Buyers need to find an agent whom they trust and ask candidly about properties that seem too good to be true.  This market requires some strategizing and preparation on the buyer's end but with the right information and advice, it is just another minor challenge to overcome on the road to a new home.

As for the "games", I advise my buyers to remember that just as we are trying to find the best terms for them, the seller's agent is doing the same for their client.  I like to think of the lowball listings as just another strategy... Good or bad, it is just that.

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