Sellers test the Toronto real estate market

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The Toronto-area real estate market is moving into the fall in fits and starts.

Sales dropped 18 per cent in September from the same month last year, while new listings contracted by a sharper 34 per cent in the same period, according to the Toronto Regional Real Estate Board.

Meanwhile, buyers pushed the average price in the Greater Toronto Area up 18.3 per cent in September from the same month last year to stand at $1,136,280.

The combination of scant supply and peak prices is tempting some investors to test the market.

But sellers who think that every property sells quickly for an eye-watering price often confront a different reality.

Many agents tweak their strategy for every listing they have.

Andre Kutyan, a broker with Harvey Kalles Real Estate Ltd., says some investors who purchased a property believing they would hold it for the long term are rethinking that plan now.

Areas such as Willowdale, Bedford Park and the streets around Bayview and York Mills have attracted lots of investors – both domestic and foreign - in years past, he says.

Now he’s seeing houses appearing for sale after they were purchased during the frothy days of 2016 and 2017. He first noticed the trend, he says, when he began recognizing the listing photos from properties he has shown in the past.

Often he can deduce the seller is an investor if the property has been up for lease in recent years or it’s currently vacant, he says.

Sometimes the listing photos provide a clue that the property has been listed in the recent past: Mr. Kutyan points to one northern Toronto house that sold in 2016 for $2.251-million. In the spring of 2017, it was put up for lease.

Now it’s back on the market with an asking price around the $3.5-million mark.

“There’s snow in the photograph,” Mr. Kutyan says incredulously.

Mr. Kutyan adds that some of his own clients have decided to sell after the dramatic run-up in the market in 2020 and 2021.

One pair of investors is planning to see how much buyers are willing to bring for the one-bedroom condo unit they bought in 2017 in the city’s upscale Yorkville neighbourhood.

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The couple purchased the 645-square-foot unit at 40 Scollard St. with plans to rent it out in the short term and possibly pass it on to a family member in the long term.

But the carrying costs have been higher than the amount they are earning in rent. During the pandemic, rental rates downtown dropped sharply and tenants asked for reductions.

Mr. Kutyan says the couple has decided to sell after a couple of units in the building received big money recently.

Mr. Kutyan plans to list unit 1504 with the attention-getting asking price of $475,000, then hold back offers until a scheduled date.

“I’m not about to fix the price – let’s see what the market’s going to do.”

Another set of investors is planning to list a bungalow they bought in April, 2017 for $1.318-million.

Mr. Kutyan plans to list the house at 394 Old Orchard Grove with an aggressively low asking price of $1.295-million and hold back offers.

He is already anticipating calls from agents asking why the asking price is less than the couple paid for the property in 2017 and how much he really hopes to fetch for it.

“I’ll say, ‘You tell me what’s happened to the market in the past four years.’”

Elli Davis, a real estate agent with Sotheby’s International Realty Canada, says setting a low asking price with an offer date can be an effective way to draw multiple offers. But she cautions that it can also be a risky strategy because the agent is in a bind if the house doesn’t sell on that date.

“If it backfires, then you’re in trouble. Your seller still thinks that it’s under-priced and should go over.”

Some agents will then raise the price to the level they were hoping for to begin with.

“I would not be in favour of that because the first two weeks usually tells the story,” Ms. Davis says.

She has also noticed lots of price cuts recently on listings that have been sitting because the asking price was too high to start. Now that more inventory is trickling out, sellers are motivated to reduce their asking price.

She’s not in favour of setting a price that is so high that the property languishes or so low that it sparks a frenzy.

Ms. Davis plans to set asking prices in line with market value as she launches two mid-town properties – offers welcome any time in the coming days.

Buyers who come to the table are likely to be serious if the asking price is realistic, she says, and the property is more likely to sell quickly.

The penthouse suite in a boutique building at 5 Rosehill Ave. has an attractive layout but it needs some updating, she says, so she is listing it with an asking price of $1.395-million.

A three-bedroom semi-detached house at 31 Oriole Rd. in Deer Park will have an asking price of $2.895-million.

The owners of both properties have lived in them for many years, Ms. Davis says, and they are serious about selling so that they can move on to a new stage of their lives.

The sellers who are intent on getting a very lofty price are often just being opportunistic and they’re willing to let a house sit, in her opinion.

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Listings like that can be costly to an agent in terms of time and expense, she adds.

“I’m not interested in people who are just testing the market.”

Ms. Davis says one investor who purchased a pre-construction condo in 2017 recently contacted her to say he is thinking about selling the two-bedroom unit, which will be completed this year.

The owner paid $600,000 for the unit, which measures less than 700 square feet, in the Yonge Street and Eglinton Avenue area.

The problem he has now, she says, is that many projects that were launched around that time are coming onstream this year. Most of the people who bought in his building are investors, she says, adding that she advised him to hold off for a while.

“I looked at the sales in the area and I don’t think he’ll make anything. I think he’ll break even,” she says, adding that he will have to pay brokerage fees and other costs. “It never changes – it’s always supply and demand.”

Robin Pope, broker with Pope Real Estate Ltd., has noticed a recent uptick in an unusual tactic: agents set a low asking price for a property but they do not set an offer date.

Typically agents who want to spark a bidding war set an offer date in order to create a sense of urgency at the deadline.

Mr. Pope says that these agents seem to hope that buyers will end up competing anyway. But what happens in reality is they get lots of calls and no offers.

“By virtue of the fact the price is so attractive, they get lots of activity,” he says. “It’s a really stupid strategy because it doesn’t always work.”

He points to a condo near the waterfront which was listed with an attractive asking price of $688,000, but three weeks later it is still on the market. The listing agent said the seller is looking for more than $800,000.

Mr. Pope again believes the listing agent is only confounding buyers by keeping the unit sitting for three weeks at a price far below what the seller is hoping to fetch.

“I’ve experienced it more often than I should,” he says of the strategy. “I shouldn’t ever experience it at all.”

Mr. Pope says one buyer feels she benefitted from an agent’s misstep. When a two-bedroom condo unit with an asking price of $999,000 and no offer date arrived on the market in the River City area, she was willing to offer slightly more than the asking price.

When Mr. Pope informed the listing agent, he replied “no way – we want more”.

Mr. Pope’s client sweetened her bid to $1.045-million. The unit should have been listed north of $1.1-million, says Mr. Pope, who believes the agent’s misfire gave the client an edge because the seller didn’t get a bidding war.

“It was a lovely apartment and she got it for an excellent price,” he says.

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