Ep. 23 - Is Underpricing All That Bad?

In this episode of The Last Honest Realtor podcast, host David Fleming tackles the controversial practice of underpricing in real estate. Is listing a property below its market value just a smart strategy, or does it cross the line into false advertising? David brings his insights to the table, drawing from a series of eyebrow-raising case studies from the GTA and Golden Horseshoe to explore the ethics, frustrations, and potential pitfalls of these pricing tactics.

From extreme price swings to seemingly endless listing updates, David dissects how some agents push the boundaries of honesty, leaving buyers perplexed and the industry facing credibility issues. This episode sheds light on the tactics that often lead to buyer mistrust, questioning if there’s a better way to approach transparent pricing in real estate.

In This Episode:

• Understanding the fine line between underpricing and false advertising
• How manipulative pricing impacts buyers and the industry’s reputation
• A real-life case study of a property with 39 price changes over 11 listings
• Why the current MLS system might need a major overhaul
• David’s suggestions for improving transparency in listing practices

Timestamps:
00:00 - Introduction
00:05 - Is underpricing false advertising?
01:30 - The case for and against strategic underpricing
05:20 - A shocking case study of MLS price manipulation
15:00 - How this tactic fuels buyer frustration
20:45 - David’s take on the need for MLS reform
28:50 - Conclusion: Seeking transparency in real estate

Don’t Miss:

• David’s honest critique of the real estate pricing games
• Eye-opening case studies that show the extremes of listing manipulation
• Insights into how misleading pricing tactics could hurt the market

Subscribe to The Last Honest Realtor on YouTube or your favorite podcast platform. Like, comment, and share your thoughts—have you encountered questionable listing practices in your real estate journey?

Transcript

SPEAKER_00 0:00

Hello everybody, and welcome back to The Last Honest Realtor. I am your host, David Fleming. Thank you so much for joining me today as we talk about one of the more contentious aspects of the real estate industry, real estate market, and real estate purchase and sales in the GTA, Golden Horseshoe, all of Ontario. That is underpricing. Now, I believe I'm going to call today's podcast, Is Underpricing False Advertising?, Sure, that will probably get some eyes on it. But I'm gonna tell you this. Underpricing is not false advertising. Asterisk. I said asterisk. I don't know if you noticed that. But yeah, my point being that if you do it in a certain way, It's not false advertising. If you do it in other ways, and there's a very, very lengthy case study I'm going to show you today, it absolutely positively is. So I don't want to sound like I'm playing both sides. What I'm going to say, on the one hand, I totally understand and believe in the practice, and I support it. On the other hand, when it is abused, I am so angry at what I... don't want to call my industry colleagues, but let's just say other people that share my occupation. So let's start with a very basic example. A house is maybe worth a million dollars. We could price that at$799 and set an offer date. Now, would you call that false advertising? If you do, you're probably just very frustrated with the state of the housing market. And I know usually when I have a contrarian viewpoint. I often blame the frustrations that exist in this market. But if we're going to be honest, a lot of the times the nonsensical arguments are just based on housing prices and frustration and everything. And I get that and I'm sympathetic, but let's just calm. Okay. We've got a 799 listing. We've set an offer date offers will be reviewed on this particular date with just a bit of experience and a bit of knowledge. You would understand that. No, they're not looking for 799. Again, disagree if you want to, but I'm just going to state that as fact. Now, here's the rub for me. You have a property that's sitting on the market at$799, and it does not have an offer date, and it has been on the market for 45 days. And you go and offer them$805,000, and they say no. Guess what, guys? I'm going to call that false advertising. So I wrote about this on my blog a few years ago, and surprisingly, the readers, some of them said, hey, David, I don't see a difference. I was shocked. Now, people want to use eBay as an example. They want to use auctions as an example. People always talk about open auctions. And again, don't want to delve off on too much of a tangent here, but I have written lengthy blog posts on how auctions work in other areas. For example, in Australia, people always say, I wish we had the Australian system. Right. You show a bunch of people standing on a lawn bidding. It's open. and bidding, a few problems. Number one, you're standing on a lawn. Yeah. So maybe you weren't available that day. Secondly, Most of those auctions do have reserve prices. Some of them are stated in advance, some of them after the fact. And if you do not meet the reserve bid, you are, quote, passed through. That means passed through to negotiations. So they might say 31% of auctions were passed through. That means that the auction closed and it wasn't enough. You have to go negotiate. Now, a lot of those properties are actually sold before the auction starts. Hmm, sounds familiar. That's called, what, a bully offer here in Toronto? So regardless, there's always a better system when you're frustrated with ours. But I'm going to give you this case study today and it absolutely positively blows my mind. I wrote a blog about it. And I called it the worst listing strategy I've ever seen. Now I don't wanna call this a listing strategy because to do that would give credit to those involved and act as though this was something that was determined in advance and whether it worked or not. No, this is simply put insanity. So before I begin, one more blog I wanna reference that I wrote years ago. I suggested that Treb on the MLS system have a box, a simple box like reserve bid. And so having been one of the pioneers of eBay, I opened my account in May of 1998, most of the auctions used to have a reserve bid and it would be there. It would say reserve price. And you didn't know if it was met or not. So let's say that you've got a property that's listed at 799 and it has an offer date. Great, check a box, offer date. Check that box for reserve bid. Check that box for no, we're not looking for 799. And this entire thing would be moot. People would still abuse it as I'm going to show you today. In any event, that's never going to happen because it's what, just too sensible. So guys, here's the blog post that I wrote, and here's what we're going to talk about today. There is a home and it is listed for sale on March 15th, 2023 for$2,499,000. There is no offer date. Okay. Right off the bat, I'm going to say$2,499 with no offer date. I would have to believe that they're looking for$2,499 because if they weren't, then it would be false advertising. Are you with me so far? Now there was no offer date. 15 days later, the price was increased by a million dollars. It was listed for$2,499. Offers anytime. 15 days later, they increased the price by$1 million. So right off the bat, I'm going to say, was this a strategy? They didn't have an offer date. Did they think that naturally, organically, people would show up and just start bidding like crazy and it would get to a million dollars over list? No, it can't be. It can't be a strategy. But this also can't be stupidity. I just cannot accept that. So the property remained on the market for five days. On April 4th, 2023, that listing of$3.5 million was terminated. April 6th, the house is listed for$2,589 million. So you're going to say, wait a minute, I don't understand. They listed for 2499 with no offer date. Then they raised it a million dollars. So now they're listed for 2589. Surely there's an offer date. No, there isn't. And that's the insane thing. Not only was this house listed for 3.5 million two days prior to this listing at 2,589,000, but it was listed for 2499 three weeks prior. No, this doesn't make any sense to me. And the listing remained for sale at two, five, eight, nine. Okay. Ready for this April 18th, 2023, the price was increased to two nine five. So they just increased it. What?$50,000. So again, I would ask, are you going to accept two nine five? History will show. Absolutely not on April 29th. This is 11 days later. The price was reduced to$2,888,000. So they reduced it$52,000. And then it sat there for a month until May 24th, 2023. They increased the price back to$3,500,000. What in the world is happening? So if you're like me, you're thinking this is blatant false advertising. And yet, this is only the beginning of this insane story. So May 25th, that listing is terminated at 3.5 million. So let's regroup. We've had two listings at six different prices over the course of 70 days. On May 26th, the house is listed for 2,180,000. So that's crazy, right? That's 1,320,000 less prices They were just listed for. Now, the listing describes price to sell, motivated seller, bring your clients to make a deal. Now, here's the thing. They set an offer date. Oh, okay. All right. Now we're talking. I mean, it's insane and it's not going to work. But on June 5th, offers will be reviewed. So we are now listed for$1,320,000 less than the seller wants. We know they want that because they've already put it up for$3.5 million twice. We are on the third listing, and this is the seventh price. Now, are people going to line up and bid on a house and bid so much and so hard that they drive it$1,320,000 over the list price? No, of course not. And on June 10th, two days after their failed offer date, the price was increased to$2,880,000. Now, this was still$620,000 below that$3.5 million target. So again, I would argue false advertising. The listing remained untouched for five days. And on June 15th, the price was increased to$3,500,000. That's the ninth price on the third listing. And they didn't sell at$2,180,000. They didn't sell at$2,880,000. So they raised the price again. That's the third time during this listing. And as mentioned, the ninth time overall. Now they terminated that listing. And then later that day, they listed for$2,280,000. I hope you guys are following. This is a lot of numbers. But if for some reason you're thinking a lot of numbers, hard to keep track, trust me, you're going to want to listen to where this goes. They're now listed for their fourth time at their 10th price. and they're at 2,280,000 with another offer date. Do you know what a placebo is? A placebo is nothing. It's prescribed to you by a doctor, maybe in a trial or maybe actually just a doctor prescribing a placebo. I saw this comedy routine years ago and it was a doctor saying, I'm prescribing you a placebo. And the sketch basically was a joke where the person said, but I know it's a placebo, so it's not gonna work. I've said this on my blog. It's been a routine or a sketch of mine. If people already know that you've been listed at 3.5 million three times, and people already know that you tried underlisting multiple times, underlisting again with an offer date is like saying to somebody, I'm prescribing you a placebo. It completely defeats the purpose. So now these guys are on their fourth listing. They're at$2,280,000 and they're on an offer date again. They just priced for an offer date two weeks earlier. Now, obviously that didn't work. So then they increased the price by$700,000 to$2,980,000. But again, that's not a price they're willing to accept. And this is the problem I have with this is this is such blatant false advertising. So it was on the market for seven days at$2,980,000. And then again, they increase the price to 3.5 million. If you're following along, that is now the 12th price. And that is the third time, excuse me, fourth time they've been at 3.5 million. So what's interesting about this is that every time they terminate the listing, they increase the price to 3.5 million and then immediately terminate. Now I'd love to see all the paperwork for this because something tells me that they're just doing whatever they want And I have another problem with that. So later that day, this is crazy. I hope you're paying very close attention. Later that day, they list the house for$1,899,000. So I don't know what bothers me more, the manipulation of the MLS system, the false advertising, or the fact that these agents think that mankind is so stupid that this could actually work. They're now listed$1.6 million below what they want because they already tried it,$1.3 million below what they want, and oh yeah, they did that last month. This is crazy. This is the fifth listing now, and we're at 1,899,000 with an offer date, and it didn't work. So of course, on July 10th, they increased the price to$3,300,000. And I'm thinking, oh, okay, so maybe 3.3. Maybe they're not looking for 3.5 anymore. Maybe something good has happened here. No. One week later, they increased the price to$3,500,000 again. And then they terminate again. They have now listed five times They have now been at 15 different prices. They have now had three offered dates. And the false advertising is so incredibly blatant, I have no idea why or how this is permitted. Now, I have no vested interest in this. I don't have a client interested in this house or any in this area. But it bothers me because it's false advertising. It's a manipulation of the MLS system. And it just really makes the public hate real estate agents. Because if I was part of the public and I was looking at this, I would certainly hate real estate agents. Guys, let me take a very quick break. I'll be right back. Welcome back. Now, before the break, we were caught up to July 17th of 2023, where this particular property had now been listed five times at 15 different prices with three offer dates. And we noted that every time this property was taken off the market, whether it's temporarily or otherwise, the price of that particular listing was increased to 3.5 million. So the one thing I will say from a strategy standpoint, and I don't wanna give credit here, Is that the seller or the agents knew every time they were going to terminate, they had to put it back to 3.5 million. Cause that is the last price that shows on MLS. Now this property remained off the market from July 17th until March 14th, 2024. That's when the sixth listing came out at the 16th different price was listed for sale for 2,389,000. And they did have an offer date, but here's the crazy thing. This offer date was set for 29 days later. Now me personally, I love a six day offer date. I like to list a property on a Tuesday and I set offers for the following Monday. Many reasons why, but essentially I like a Monday offer date. I like a Tuesday listing. Mondays are busy. Fridays are busy. List on Tuesday, Wednesday. Take offers the following Monday because that way buyers are ready to bid. They've been through the weekend open house. They have their deposit check in hand and they're not looking at new listings. Now none of that applies to this because this house is never going to sell and it's an absolute joke, but 29 days, if you had said eight or nine or 10, fine. Sometimes I see people hold back for 12, 13, 14 days because that agent wants to open houses. I vehemently disagree with the strategy, but nothing is as bad as this listing where they held back offers for 29 days. So now we see this note, seller reserved, supposed to say reserved, they can't spell, writes, supposed to say they're right, to take preemptive offer at any time without notices, supposed to say notice. This is another pet peeve of mine. You can't spray paint on the side of your car, allowed to drive 160 kilometers an hour, and then when you get pulled over on Highway 401, you say to the police officer, but I said I was going to. Do you see where I'm going with this? You can't post something on MLS saying that you're going to break the rule and expect to break the rule. This has always bothered me. This started in 2017. Agents started saying, seller reserves the right to accept a preemptive offer without any notice, but you have to give notice. It's in the code of conduct. If you are going to move your offer date, because there is a preemptive offer, you have to notify anybody who has, quote, expressed interest, whether that's an agent that has already been through a showing or an agent that has a showing booked for a week from now or anybody that called you on it. So it really bothered me in 2017 when we started to see this, and seven years later, organized real estate has done nothing about it. Now, on April 20th, the price of this house was increased to$2,980,000 because, of course, Nobody showed up to their stupid offer night. We're now at the 17th price. Here's where things get really weird as though they haven't already. We increased to 2,980,000, which as we know is 3 million, sorry, 300, excuse me, try one more time, 520,000 below their magic number. Five days later, they decreased the price to 2,589,000 and they set another offer date. That doesn't make any sense. You had an offer date. It didn't work. I mean, that's the fourth offer date that didn't work, by the way. But point is, you had an offer date for April 12th, 29 days after you listed the property, which absolutely no sense. And then you raise the price and then you lowered the price during the same listing and set another offer date. Well, that offer date didn't work. But before we got to that offer date, here's something I've never seen in my entire life. Offers are on May 6th. April 30th, they decreased the price to$2,489,000. They decreased the price before an offer date. I mean, none of this really matters. This is literally the definition of rearranging the deck chairs in the Titanic. You get where that's going? Yeah, because it's going to sink anyways. Great. So May 24th, they increased the price to$3.5 million, our magic number, and the listing is subsequently terminated. That is 20 prices now. That is five offer dates. Now, On June 8th, the house is listed for$2,999,000 with no offer date. This is the seventh listing at the 21st price. Now with no offer date, I'm starting to wonder, okay, maybe now, maybe they're signaling enough is enough. We'll list it$2,995,000 with no offer date. No. June 15th, they decreased the price to$2,899,000. Six days later, they decreased the price to 2,799,000. Four days later, they increased the price to 2,995,000. One day later, they decreased the price to 2,799,000. One day later, they decreased the price to 2,699,000. Three weeks later, They decreased the price to$2,599,000. And then four days later, they increased the price to$3.5 million and terminate the listing. 28 prices. And you know, the funny thing is they didn't terminate the listing. I really looked into this. They suspended the listing. They didn't terminate it into two weeks. into the next listing. So they actually now had the property listed twice. One was suspended and one was active. You don't care. No one cares. The property is not going to sell. So changing the price of this every other day, blatant manipulation of the MLS system. What they were trying to do, I don't know. Get fresh eyes on it. Were they trying to have this show up as an edited listing so that it appears in the updates in some MLS sections? We're now to July 24th. And this house is listed for$2,689. This is the eighth listing. The 29th price. And there is no offer date. We know they want$3,500,000. They're listed for$2,689. August 2nd, they decreased to$2,499. The next day, August 3rd, they increased to$2,689. The next day, August 4th, they increased to$3.5 million. And the listing is subsequently terminated. Because anytime you get to$3.5 million, you terminate the listing. This is where I start to get really angry. August 6th. And I mentioned that they had two listings for the same property. Yeah. August 6th, they're on their ninth listing. They're on their 33rd price. I can't even keep track. And they're listed for$2,698,000. And there's no offer date. September 18th, the price has increased to$3.5 million and the listing is terminated. I'm not done, by the way, because there's one more listing. September 18th, the property is listed for$2,398,800. And there's an offer date set, September 29th. Again, seller reserves the rights to accept the preemptive's offer without notices. We're now at the 10th listing, the 35th price, and it doesn't work because why would it? September 23rd, the price has increased back to 3.5 million. Oh, here's the crazy thing. They didn't immediately terminate the listing because September 28th, they decreased the price by$1.2 million to$2,398,000. And then on October 21st, the price was increased back to 3.5 million. Then the listing was terminated. Later that day, they listed the property for sale for$2,398,000 and there is an offer date set. We're all caught up. Guys, in total, this property has been listed 11 times at 39 different prices. There have been eight offer dates. It has been listed for almost 600 days. And the one thing I didn't mention is that there have been four different listing brokerages on this. And that's pretty bad as well. Now, why is that pretty bad? I'll start with that because there's so many things bad about this. Well, because it tells me that four different listing agents decided to go down this road. It tells me that probably it was the seller who said, this is what I want to do. But to find one listing agent that would engage in such utter nonsense is disappointing. To find four is infuriating. Now, Excuse the tangent, but I tell many of them here. Not more than an hour ago, I got an email from somebody that said they were looking to sell their house in Brampton. I looked up the listing and it was just listed for 1.8 million. It was terminated. I'm not going to list this house, but I wanted to see where this would go because I thought it could be blog fodder. The house next door is listed for 1,499. It's identical, except it's in much better shape and it's been on the market for three months. So let's say these houses are both worth 1.4 million. I wrote this individual back and I said, nice to hear from you. Are you looking to interview listing agents? Would you like my opinion of value? The person wrote back and said, I'm looking for companies that buy houses for cash. Okay. Those exist. They typically pay 70 cents on the dollar or less. By my math, somebody might buy your house for 900,000. And I wrote back and I said, sure, what kind of price are you looking for? The person said, make me an offer. And I left it there because I had finished amusing myself. So the point is this. Let's say that that person said, David, I like you. I think you're great. And I want you to list my house for 1.8 million. I would say no, respectfully, of course. Of course, I would have done a CMA that would show what it's worth. And the fact that the house next door, which is identical, is on the market for$1,499,000 unsold after three months tells me it's probably a one-four house. But if that person said, I get you, I get you, and whether they agree or disagree that the house is worth 1.4 million and said, I'd still like you to list my house for 1.8, I wouldn't do it. Not because I'm a bad person, but because that's not really what we do. Now, the point is this. With this ridiculous house that was listed 11 times for 39 different prices with eight failed offer dates, there were four different listing agents. Four different people walked in there and said, yes, I will do this. So the third person, what were they thinking? They'd already looked at the listing history and seen twice already this property had been listed and the price had gone up and down like a yo-yo. Was that agent not offended? Was that agent not disappointed to see that previously another industry colleague had changed the price on Monday and then Wednesday and then Friday, all while false advertising? No. No. Four different people took this on. Four different people said, yes, I'm going to do this. And why did they think they were going to sell it? So that's a pretty disappointing part of this story is that four different agents were involved in this. But the most disappointing part is that this is allowed to happen because this is blatant false advertising. And again, I go back to the very beginning of this story today and I say, if you have a house that's worth a million dollars and you list it for$7.99 and you say there's an offer date, Is that false advertising? No, it's not. I contend that when you signal that you are looking for more than your list price, people could call it my asking price. Let's call it a list price. You can call it semantics and I won't. The list price is$7.99. There's an offer date for next week. And God forbid you run some comparable sales and say, oh, this looks like it's worth a million dollars. The presence of that offer date, which is specified in the MLS listing, tells us that this is merely a list price. I mentioned earlier, I believe it would be incredibly helpful if on MLS listings, Treb would allow us to check a box for reserve price or list price, not ask price. But again, you know, it's too complicated. This mess of papers that you see before me, if you're watching on YouTube, or you can imagine it, if you're listening on Spotify is exactly what I hate about this industry. First of all, There are agents that will allow this to happen. There are agents that will walk into this. There are agents that will even strategize with this. But second of all, there's nothing really to stop this from happening. Now, I'm sure if somebody had made a complaint during this process, maybe Treb would have sent a letter. And they do, right? I don't want to crap on Treb. There's a lot of listings, a lot of agents. There's a lot of stuff to look after. But someone has to notify them. Someone has to make a complaint. But to take a property... that has been listed five, six, seven, eight times, all for$3.5 million at the end, which is clearly what the seller wants, to list that for 2.5 with offers anytime, it's false advertising. To then decrease the price to 2.4, it's false advertising. Decrease the price to 2.3, false advertising. Increase the price at 2.8, false advertising. There's absolutely no way to explain away this behavior. It is all blatant, false advertising. And it makes me so incredibly angry. So what do we do about it? If you're a member of the public, file a complaint. File a complaint to Rico. File a complaint to Treb. That's the only way that this stuff stops happening. But again, and I don't want to be a defeatist, I just don't know if... Organized real estate has the resources to police it. So again, I go back to the example of if the Toronto Maple Leafs suck and you're tired of them sucking, stop supporting the team. Because if they're continuing to sell out the arena, there's absolutely no reason for them to get better. And I've made this point for many years, right? I won't get off on too much of a tangent, but I was a massive Leaf fan when I was like 21, when I was stupid like everyone else. And eventually I realized that it's a business and they don't really care about winning. Actually, now I've come to realize They can't win despite all their resources. They haven't won a Stanley Cup since there were only six teams in the league. But the example I use is, hey, listen, if you want it to change, then don't support it. And they're going to sell out and there's no reason to change. So in this case, I would say, who's hiring these agents? Who's cooperating with them? Who's showing this house? The behavior has to stop from the inside or it has to stop from the top down, which is Treb and Rico. But guys, as far as the concept of false advertising goes, I believe that there is a right and a wrong. I have no problem with listing houses for$7.99 when they're worth a million, so long as you specify that there is an offer date. But when you do something like this, this is 11 listings, 39 prices, eight offer dates, four listing brokerages, 600 days. I mean, it makes for good blog fodder and for a good podcast, I suppose, and hopefully it was entertaining. But man, is it ever disheartening. Anyways, guys, I'm going to leave it there for now. I hope you enjoyed this look at the difference between false advertising and underpricing. Thank you so much for watching on YouTube. Feel free to leave a comment for me and I'll try to respond. Feel free also to like, comment, or subscribe wherever you listen to your podcasts. And we will see you next time on The Last Honest Realtor.