There are some milestones that anyone would be happy to reach. Whether it is a wedding anniversary, reaching your net worth goal ahead of schedule or achieving a fantastic sale to list price ratio on the sale of your home, some results are worth celebrating.
In some cases, though, you see people hit milestones that are definitely not desirable.
We work with clients on both the buy and sale sides and we regularly see properties that are priced poorly. Sometimes it’s because the market has shifted and the seller and their agent haven’t come to terms with it, sometimes it’s because the agent doesn’t understand how to value real estate and sometimes we have no idea why they priced it that way.
When a listing agent prices a property poorly, they often see poor results when it comes to days on market and eventual sale price. We saw one particular condo unit that has been on the market a staggering 258 days as of March 3, 2023. It listed in June, 2022 and it’s still for sale. We checked to see if it was just a building where it takes a long time for units to sell, but it turned out the average length of time a condo in that building took to sell in the past year was 26 days. This unit is approaching taking 10 times longer than the average unit in the building takes to sell. That’s a milestone not many sellers would appreciate hitting.
We won’t share the specific address of the unit for privacy reasons, but it’s a typical condo apartment unit in the downtown core. It’s about 10 years old with decent features and finishes and it’s entirely sellable. The reason why its still for sale has less to do with the unit itself and more to do with the approach taken by the seller and their agent.
We thought we’d use the history and story of this particular unit to share our three rules on what not to do when listing a property for sale. Let’s get started!
Rule #1 – Don’t list a tenanted property for sale.
When this condo unit went for sale back on Sunday, June 19, 2022 it was tenanted. According to the MLS system, this unit has been an income property since the building was built back in 2014, with a number of lease listings in place.
When an owner-occupied property goes on the market, you generally have the full co-operation and engagement of the occupant. They want to sell the home for as much as possible and as quickly as possible, so they accept the inconveniences of having showings of the property.
- No notice? Sure, I’ll leave.
- Late agents who show up after I came back? Come in, I’ll go for a walk.
- Still there talking about furniture when I open the door to the unit? Take your time, I’ll wait in the hall.
While tenants can be understanding about the landlord’s decision to sell the property, it is, in almost all cases, an entirely negative event. They have to go through the hassle of finding a new place to live and they have to accommodate prospective buyers interrupting their enjoyment of the unit.
In many cases, listing a property that is tenanted for rent results in it showing poorly and being harder to book showings. Combine those two things and you have fewer people seeing a unit that doesn’t look as good as it could. If that sounds like a recipe for a long time on the market and a lower sale price, you’d be correct.
We often advise our investor clients who are considering selling a condo unit to wait until the end of the current tenancy if that is possible. It allows us to spruce up the place so it shows its best and to provide easy access to perspective buyers. That may not always be possible, so we’ll tweak this rule slightly to make it “Don’t list a tenanted property for sale, unless you have no other choice.”
In the case of the unit we’re focusing upon, it remained on the market with a tenant in place until September 1st. At that point, the listing was changed from “tenanted” to “vacant”. The showing availability went from “24 hours notice required” to “showing anytime” and it suddenly became much easier to show the property. Mind you, at this point, the listing showed as being on the market for 103 days, so it already seemed like a stale listing that might have something wrong with it.
Rule #2 – Make sure you describe it accurately.
When this condo was listed in June, 2022, the listing agent put the property type as “Comm Element Condo”. This type of condominium corporation has no units and only has common elements such as a road. Owners use the common elements and jointly fund their maintenance and repair through the payment of the common expenses.
We do see such properties in the city, but they are most common with a small collection of townhouses. In the case of this listing, it is a large condo tower with hundreds of condo units. If the type of property the agent chose for the property sounds like it isn’t a condo apartment, where you have ownership of your specific unit, that’s because you’re right – he put the wrong description.
It took more than two months for the listing agent to realize his mistake and correct it. In October, he changed the property type to “Condo Apt” and that would have made a huge difference in the number of people seeing the listing. The reason for this is because in the MLS system, a field that must be chosen by agents setting up searches for clients is not just whether it is a condominium property (as opposed to a freehold property like a house), but also whether it is a condo apartment or something else. When the agent put the wrong property type, he inadvertently made it so that the listing was effectively invisible to agents who chose condo apartment.
The seller would have had to sign off on an MLS Data Information Sheet that specified the type of property, but they would been unlikely to realize the difference between a “Comm Element Condo” and a “Condo Apt” and relied upon their agent getting it right. While the agent would have had to have an amendment prepared and signed by the client to make that change, our suspicion is that didn’t take place and the seller had no idea the disservice that was done to them during this initial listing period.
Rule #3 – Listen to the market.
It took 95 days on the market for the listing agent to have their seller agree to a price reduction. The listing started at $1,069,900 and after three months, the price was dropped to $999,900. That’s both a significant dollar decrease as well a significant psychological barrier being crossed when it listed at under $1M. It took too long to get there, but it’s the right approach. We often see properties decreased by too small an amount to make a different in the perception of the market, so kudos to the agent for getting this right.
It was a week after this price drop that the agent realized he had the wrong property type listed and corrected it. He let the listing go for another week at $999,900 before he convinced his seller to drop the price again, this time by $40K, down to $959,900. Again, that’s a reasonable price drop given the list price and is an indication the agent did his job by letting the seller know a smaller price drop wouldn’t make a difference.
On October 31, 2022, the listing agent got the seller to agree to an extension to the listing contract, as the original listing contract from back on June 19, 2022 was expiring. This was a sign of faith from the seller that despite the length of time on the market and the two price drops that had already taken place, this agent could get the unit sold.
Unfortunately, that change to marking the listing from a status of “PC” (for Price Change) to “Ext” (for Extended) was the last visible action taken by the listing agent. In the 123 days since that change was made, there have been no changes to this MLS listing. The price remains the same, the wording remains the same, and the property remains on the market.
The final rule is arguably the most important and it’s simply that you have to listen to the market. There is no debate over whether the property is worth the list price – the market has told them that it isn’t worth $959,900. If it was worth that price, someone would have bought it by now. It has been on the market for 258 days, almost 10x the length of time that a unit sells for in the building on average. It’s been vacant and easy to show for 183 days, or six months. If anyone wanted to see the unit, they did. If anyone wanted to pay that price, they could have done so. The seller and their agent need to listen to the market and relist at a lower price if they plan on selling the property.