If there’s one thing potential buyers seem to resent in the hectic Toronto real estate market, it’s sellers who draw people to their property with an asking price that has no relationship to the amount that they would actually accept for the place.
Readers reacted vociferously to this month’s story about a condo in the Queen West neighbourhood that was listed for sale at around $159,000 and attracted 16 offers. The owner turned them all down and listed the unit again with the asking price bumped up by about 142 per cent to $359,000.
Why is that very low price not deemed fraud or at least misleading advertising, readers asked in e-mails and online comments.
“How is that not illegal?” was a common refrain.
For a fuller explanation of the rules, I put the question to Tom Wright, president of the Real Estate Council of Ontario (RECO).
Mr. Wright clearly has empathy for the many bidders who join that type of competition. “I can see why they feel they are wasting their time.”
But his explanation is straightforward: RECO doesn’t regulate the seller. And by tossing out an asking price, the seller is opening negotiations. “It’s simply an invitation.”
More formally, RECO is a not-for-profit organization responsible for administering the Real Estate and Business Brokers Act, 2002, on behalf of the provincial government. It’s part of its mandate to protect the public interest through a fair, safe and informed marketplace.
So it can make sure real estate agents follow the rules, and impose penalties if they don’t. Consumers who feel an agent stepped out of bounds can make a complaint.
However, RECO does not regulate how the seller attracts attention to his or her property and negotiates a deal.
“It’s a marketplace,” Mr. Wright says.
Although right now it seems as if sellers in Toronto hold a lot of power, sometimes buyers rule.
“It’s feast or famine,” he says, of real estate cycles. He also points out that competing offers are still relatively rare in the context of a provincial market.
He acknowledges that bidding wars create special circumstances for the seller and the buyer. And, of course, there is a lot riding on the outcome for both sides, which is why the discussion about rules becomes so testy.
“There is an emotional aspect to buying a home and certainly selling a home.”
Buyers who feel duped by artificially-low asking prices should imagine themselves in the opposite scenario: would they be complaining that the asking price was artificially high if they were able to bargain the $500,000 asking price down to $400,000? Probably not.
“If they accept it, you’ve got yourself a home,” Mr. Wright says.
Mr. Wright says RECO has been finding new ways to get information out to home buyers and sellers. It offer videos on YouTube and consumer newsletters and bulletins on topics such as competing offers. The agency also wants to ensure the public knows that real estate brokers and salespersons must follow a code of ethics.
“As a regulator we provide a neutral source of information. We’re not selling anything.”