New Proposed TREB Rule R-345 Doesn’t Go Far Enough

Here’s a common response we get from our buyers when they receive a listing that looks interesting to them…

"This listing looks pretty nice. I see that the MPAC indicated the home was assessed at $356,000 in 2006… but is now listed at $329,000.  Does this mean that it would likely go for somewhere around $350-$360,000?  If yes, then it would probably be out of our price range. Although we do have a meeting with the mortgage consultant today… so we’ll have a better idea tonight."

Sally responded to our client’s email with the following…

"This is the problem with listings these days.  The list price sometimes means nothing.
 
Typically home are worth a little more than the Assessed Value so why did the agent list at such a low price?  To generate lots of offers and drive the price up!!  Good practice…No! Typical of this market…Yes!
 
I know it is hard for you as a buyer to get a good sense of what you should be looking for price wise as you will constantly be second guessing can you afford the property or not.

We are just in the process of trying to get a meeting with the Toronto Real Estate Board to discuss this very issue… we need the buying public to complain to TREB about this under pricing practice.
 
I suggest if this property is one you think you would like to see, let me know what’s a good time for you.
 
Good luck with the mortgage consultant tonight."

The Toronto Real Estate Board just today issued a memorandum suggesting some changes in the way listings are presented.  However they only addressed one issue… that of agents listing homes for one or more weeks and not only holding off offers for that time but also holding off showings as well.

Here’s what they suggested as a change to MLS Rule R-345…

MLS® Listings appearing on the MLS® System shall be immediately available (subject to applicable legislation, the rights of and reasonable accommodation to the occupancy) for showings, inspections and registration of Offers.

In the event an existing listing becomes unavailable for showings, inspections or registration of Offers, the listing shall be suspended.

While under suspension a record of all requests by Co-operating Brokerages for showings, inspections and registration of Offers shall be kept by the Listing Brokerage.

Upon the Seller rescinding the suspension, the Listing Brokerage shall immediately notify all Co-operating Brokerages who have requested showings, inspections or registration of Offers.

The following is a letter I wrote to TREB addressing this matter…

With reference to the TREB Proposed Rule R-345 stating…

MLS® Listings appearing on the MLS® System shall be immediately available (subject to applicable legislation, the rights of and reasonable accommodation to the occupancy) for showings, inspections and registration of Offers.

It is the feeling of my Team that this does NOT go far enough.

The rule should read that the listing should be immediately available for presentation of offers as well.

The current practice of deliberately ‘under-listing’ homes and holding off offer for a typical 7 days with the specific intention of generating multiple offers is harmful in several ways.

First of all, it is the lazy agent’s way of having to deal with a listing for only seven days.  In that sense it is very effective.  The listing agent puts the property out on MLS, typically a minimum of $40,000 – $100,000 or more below market value, allows showings for the next seven days, takes offers and sells the home within a week.  The look to be the hero of the day but there are several problems with this.

Number one, it often does NOT get the seller the best price.  Our Team typically does between 200-300 buyer ends EVERY single year.  Quite commonly, we’ve appraised the property at a price higher than it ended up going for.

Next, it is completely unfair to the typical buyer.  Their budget is $400,000 max let’s say.  The listing comes out at $359,000 in a neighbourhood where the house next door might have sold within the last month for $450,000.  The buyer thinks they have a chance to buy it at a big discount and wants to see it.  They get their hopes up unnecessarily because the seller would never let it go for within their budget range.  They pay and set time aside to take off work to have a home inspection done, they hire a babysitter to be at home while we go and present the offer, stress themselves out to stretch to $410,000, all the while hoping that they have a chance.

But of course, NO GO!  There are nine offers and it goes for $440,000… less than what we valued it for BUT far more than they could afford to go.

What happened to the “old method” (I’ve been a professional Realtor since 1980) of doing a proper appraisal, listing it 2-5% above market value, open a listing up for showings and then take offers as soon as they come in???

It’s much fairer for the buyers, opens up the sellers to get the best possible price, and takes the FALSE hype out of the marketplace.  With all the turmoil in the US market, we definitely want to avoid the perception that we’re in an overheated market here in Toronto.  Look what’s happening in Florida, Nevada and California now.

As a side note, this certainly must play havoc with TREB statistics, specifically the percentage of sale price to list price.  Its totally out of whack because of these deliberately underpriced listings!.

My wife Sally and I respectfully request an opportunity to speak in front of your committee in this matter.

Thomas Cook

If listings had to be immediately available to accept offers, that would ruin the agent’s attempt to create an auction effect and thereby force them to do their professional job correctly and list homes at the correct list price.

We would love your input in this matter!  As a buyer, it’s extremely frustrating, and often expensive, to have to deal with underpriced listings and second guess where to put in your offer.  Where’s the ethics in the process to treat the buyer’s in a fair fashion?

Do you have any feedback for us on this?

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