Baby, we got a bubble!?

[TOphotog]

Actually that might lower or raise the average price.
If something was listed at 1.5 million. Average price in the neighbourhood comparable was 1.45 million and no sale and you do a private 1.4 million, that would distort the average price up as reported and not down.

Agreed, it would change the number for the immediate neighbourhood down, but it would change the ASP for the MLS district (which is how these numbers are reported) up, since these districts incorporate large areas, and many neighbourhoods. C09 and C12 are usually the only neighbourhoods where the ASP is reported over $1M for the month. There are a lot of $1M+ deals out there in other neighbourhoods not being reported for these two reasons (pocket listings and sold after expired).

 

[TOphotog]

....My favorite unscrupulous realtor trick:
-house listed for $500,000. No offers, no bids. 3 months later taken off market. House relisted 3 months later at $450,000. Offers comes in first week at $440,000 and seller accepts.
-house sold in 3 days at 98% of asking!.....

And here is the usual behind-the-scene explanation:
-homeowner asks agent for Comparative Market Analysis, which shows the house is worth $440-$450K. Agent suggests a listing price of $459K.
-homeowner thinks that his house is worth $500K because that's what the neighbours' house sold for (even though the neighbours had spent over $100K putting in new kitchen, baths, flooring, roof, etc). Homeowner insists on listing price of $500K.
-house expires, homeowner realizes he overlisted, re-lists again at an reasonable price of $459, house sells $440K because now it's referred to as a 'tired listing' and can't get $450K. The agent still did his job, and yes, it sold for 96% of the 'reasonable' asking price.
Remember: we don't control the asking price, we only provide the information and advice for the homeowner to make an informed decision on it.

 

[interested]

^^^^
Tophotg;
This is quite true I believe about owners thinking their house is worth more for their own personal and often not transferable reasons. Knowing what a house is worth is easier in a subdivision where every home is similar and in a stable market. In a changing market and when there is a unique house, knowing the value is not so easy.
Also, regarding all the bidding war situations that were set up previously (though not occurring much now): Do you think this was the sellers idea of the agent's idea most of the time?
And if it was the agent's, was he/she doing his job and asking a "reasonable" asking price?

 

[CN Tower]

And here is the usual behind-the-scene explanation:
-homeowner asks agent for Comparative Market Analysis, which shows the house is worth $440-$450K. Agent suggests a listing price of $459K.
-homeowner thinks that his house is worth $500K because that's what the neighbours' house sold for (even though the neighbours had spent over $100K putting in new kitchen, baths, flooring, roof, etc). Homeowner insists on listing price of $500K.
-house expires, homeowner realizes he overlisted, re-lists again at an reasonable price of $459, house sells $440K because now it's referred to as a 'tired listing' and can't get $450K. The agent still did his job, and yes, it sold for 96% of the 'reasonable' asking price.
Remember: we don't control the asking price, we only provide the information and advice for the homeowner to make an informed decision on it.

And this ladies and gentlemen is what we call deflecting.

I don't care what the back story is and neither does the public. The reality is that house sold for 88% of asking price in 6+ months and if your organization had any ethics that's how they would report it.

 

[TOphotog]

In a changing market and when there is a unique house, knowing the value is not so easy.
Agreed, establishing a value requires indepth research and also gut instinct. I always advise "this is what your house should be listed for in a normal market, but as we know, this isn't a normal market and we will probably get multiple offers". I always advise to go with the normal listing price and see what the market does. Example: House is listed for $1M, sells for $1.3M in bidding war. Exact same house now is listed for sale in same market. It should also be listed for $1M and see what the market does. Just because House A got $1.3M doesn't make the new value of House B $1.3M.

Do you think this was the sellers idea or the agent's idea most of the time?
Most of the time, I think the agent suggests a reasonable price, the seller agrees, the house is listed and it attracts multiple offers because there are so many buyers out there. The house price is driven up in the hours before the offers are presented, predicated by the number of offers registered. All offers are presented and the seller picks their preferred offer (not ALWAYS the highest one).
Agents who purposely list far below value are usually either new or stupid. After all, when banks finance 75-80% of a property, they determine that on the ASKING price, not the sale price if there are multiple offers and it sells well above asking. That deal falls apart immediately when the buyers are told that they have to cover the "over asking" portion with cash. I warn homeowners against this tactic, as I do not agree with it, I have seen the pitfalls of it, and I don't think it's fair to the buying public. We cannot control the homeowner in pricing. I've seen situations where there is only one offer on presentation day, for full asking, and the homeowner refuses because they wanted more. I've had listings where I've expected multiple offers and on presentation day, nothing appears. I've had listings where the homeowners want to list for MUCH higher than I recommend, offers come in verbally for my recommended price but are refused, the house sits and eventually the market value DROPS below my recommended price, because the listing is stale. This situation cannot be fixed, it can only be endured by the agent, and the homeowner will suffer financially on the eventual sale price. I had this happen twice recently, and the stress is unbelievable.

 

[TOphotog]

is what we call deflecting.
It's not a deflection, it's a possible explanation for pricing differences between listing periods.

It's not a matter of ethics in reporting, it's a matter of contract. You cannot report a percentage of asking price based on an entirely separate contract (listing). If yours is the preferred method, how far back should you go? One month, six months, two years? In the same vein, would I also be allowed to report that I sold a property for 168% of the price that it was listed for two years ago and never sold? No. The sold percentage is based on each individual listing, which is a contract.

 

[rbt]

And this ladies and gentlemen is what we call deflecting.

I don't care what the back story is and neither does the public. The reality is that house sold for 88% of asking price in 6+ months and if your organization had any ethics that's how they would report it.

Sale price relative to asking price is a ridiculous thing to look at; above or below. It has zero meaning. Sometimes sellers will even reject unencumbered offers for the asking price.


With low volume stocks/options you regularly get a persistent asking price 20% above what trades are occurring at. The ask price is the suckers price. The computers doing the trading will gladly accept something below ask if you submit it.


Look at actual sale prices over time to find trends.

 

[ISYM]

CN Tower, I would prefer if percentage of asking price was not published on the statistical reports because it is actually a meaningless number for several reasons.

When trying to establish a price from comparative sales, Realtors, buyers and sellers defer to the only numbers that matter – the sale price and the asking price(s), in that order.

DOM provides no analytical value at all to the transactions in the aggregate as reported on a monthly basis especially when properties are under-listed for multiple offers. It would have true instructive value only if list price was determined by a solid scientific formula or if homes traded hands (to TOphotog’s point) like the stock market on a previously established selling price.

To add further to TOphotog’s point, many times properties that failed to sell are often re-listed via a different brokerage, sometimes immediately upon termination or expiry of a listing, sometimes months later. If the first listing lasted 120 days and the second recorded a sale on its 10th day, to publish that it was on the market for 130 DOM without the background doesn’t establish whether it was over-priced or a peculiar property. So to then take the aggregate average of all doesn’t establish market direction either.

 

[CN Tower]

is what we call deflecting.
It's not a deflection, it's a possible explanation for pricing differences between listing periods.

It's not a matter of ethics in reporting, it's a matter of contract. You cannot report a percentage of asking price based on an entirely separate contract (listing). If yours is the preferred method, how far back should you go?

1 year sounds very reasonable to me.

And, I might add, the whole "sold in 5 days!" "99% of asking price!" charade is a veiled attempt by realtors to instill:

1. A false sense of hyper market activity
2. A false sense of urgency to act now

Both of which naturally lead to more and more sales.

So while some of you good souls may genuinely dislike this industry tactic I can assure you the heads of your organization demand it.

 

[kalvinone]

On the flip side, I recall seeing (on the news) an owner list their property for $1... and ended up lik $400K ... so only 400,000% above asking.. certainly one way to skew the system.

 

[ISYM]

1 year sounds very reasonable to me.

And, I might add, the whole "sold in 5 days!" "99% of asking price!" charade is a veiled attempt by realtors to instill:

1. A false sense of hyper market activity
2. A false sense of urgency to act now

Both of which naturally lead to more and more sales.

So while some of you good souls may genuinely dislike this industry tactic I can assure you the heads of your organization demand it.

CN Tower, to whom do you refer when you say you assure our “organization†demands we use this tactic?

Yes I agree it is a tactic but one employed for advertising originating mostly at the salesperson level rather than the reason you suggest. As an example, flyers or sold signs stating that a property sold for X% of or over asking in X number of days is really intended to point to the salesperson or brokerage.

I personally don’t agree with this type of advertising if the price has changed or the property re-listed by that salesperson/brokerage unless it carries an adequate disclaimer and am on record elsewhere for saying that I believe this is misleading advertising.

Individual advertising points to specifics but that’s entirely different from the board’s aggregate which states that the average number of days on market or sales to listing price was X.

Anyone who knows that a Realtor is producing misleading advertising can contact RECO online and file a complaint – all complaints are taken seriously and the fines are by no means small

 

[James]

Realosophy has a good write-up about what seems to be the big issue with TREB's reporting...

Source: http://www.movesmartly.com/2013/10/...utm_campaign=Feed:+movesmartly+(Move+Smartly)

Can We Trust Real Estate Statistics Published by the Real Estate Industry

Posted: 30 Oct 2013 05:49 AM PDT

John Pasalis in Toronto Real Estate News

A Globe and Mail article published this week questioning the accuracy of Canada’s housing data published by the Canadian Real Estate Association prompted me to write this long overdue post about sales statistics published by the Toronto Real Estate Board (TREB).

The Toronto Real Estate Board publishes a monthly report called Market Watch which is typically released during the first week of the month reporting on sales in the previous month. As part of their Market Watch report TREB also publishes a press release summarizing the sales statistics for the month.

The percentage change in the number of homes sold is calculated by comparing the current month’s sales to the number of sales in the same month in the previous year. For example, the percentage change in sales in September 2013 would show the increase or decrease from September 2012.

Up until June 2011, this was a pretty basic calculation. One could open the current month’s Market Watch along with last year’s Market Watch report to get the sales numbers required to calculate the percentage change which would of course be the same percentage change published by TREB in their press release.

In July 2011 TREB changed how they report the percent change in sales they publish in their press releases. TREB now compares the current month’s sales as published in their Market Watch report to an “adjusted” sales figure for the same month in the previous year. According to TREB the adjustment takes into account the fact that a number of the properties that were reported as sales a year ago fell through.

TREB has indicated that they are taking this approach because they want to use the most current and up to date data they have available. On the surface, this all seems pretty reasonable. After all, who doesn’t want to use current data?

But when we look at what’s really happening in a bit more detail, we see that TREB’s approach is not only flawed but it misrepresents the sales statistics they publish every month.

Let’s take a look at how this change impacted the sales statistics released in September 2013. According to the September 2013 Market Watch report there were 7,411 sales that month which was a 26% increase over the 5,879 sales reported in the September 2012 Market Watch report. But in TREB’s September 2013 press release they compared the 7,411 sales last month to an adjusted figure of 5,687 for September 2012. While on the surface this seems like a minor difference, the result is that TREB was able to report that sales were up 30% in September rather than 26%.

Comparing sales this month (unadjusted) to adjusted sales in a previous month doesn’t make any sense. The major problem with this approach is that the adjusted sales figure in the previous year is always going to be lower than what was originally reported for that month.

The following chart shows the actual sales reported by TREB from April-September 2012 along with the adjusted sales figure they used to calculate the percentage change statistics released in their press releases this year.

Now you might be thinking, who really cares? The differences above appear to be relatively minor.

The problem is that any increase in sales will always appear higher when we are comparing to last year’s adjusted sales figure vs the unadjusted sales figure. Similarly, any decline in sales won’t look quite as bad when compared to the lower adjusted sales figure.

To see what this looks like in real life, the following chart shows the actual percentage change in sales over the past six months (using sales statistics published in TREB’s Market Watch reports) compared to the percentage change reported by TREB in their press release using a lower adjusted sales figure for the previous year.

You can see that by comparing sales to a lower adjusted sales figure in the previous year, a 5% drop in sales in April was reported to the media by TREB as a 2% decline in sales. Similarly a 4% decline in June was reported as a 1% decline.

In July an increase of 13% was reported as a 16% increase and most recently the 26% increase in September was reported by TREB as a 30% increase.

TREB’s argument that they are calculating statistics this way because they want to use the most current data is not a genuine one because they also know that the sales data for the current month is overstated yet they make no effort to disclose this nor do they adjust it down to take into account the fact that many of the sales reported in September 2013 will eventually fall through.

An institution that cared about the quality and accuracy of the statistics they publish would not be comparing unadjusted numbers this year to adjusted figures in a previous year.

 

[interested]

This is a great article, clear and factual. Thank you pointing out this article from Realosophy.
I think the conclusion is inescapable. By reporting to an adjusted figure there is a bias of over representing the sales % increase and under representing a sales decrease.

As pointed out, comparing unadjusted numbers this year to adjusted from the previous year only serves to distort the data in favour of suggesting a stronger market. I cannot see any other purpose. Alternatively, TREB could wait 3 months and report adjusted compared to adjusted figures.

 

[CN Tower]

This is a great article, clear and factual. Thank you pointing out this article from Realosophy.
I think the conclusion is inescapable. By reporting to an adjusted figure there is a bias of over representing the sales % increase and under representing a sales decrease.

As pointed out, comparing unadjusted numbers this year to adjusted from the previous year only serves to distort the data in favour of suggesting a stronger market. I cannot see any other purpose. Alternatively, TREB could wait 3 months and report adjusted compared to adjusted figures.

Why is Zillow not in Canada yet? Who wants to start it with me? I can probably arrange the financing.

 

[TOphotog]

Why is Zillow not in Canada yet? ....

It has nothing to do with them obtaining financing, believe me. It has everything to do with our strict privacy laws. Zillow can't publish in Canada the information they are allowed to publish in the US.