Toronto lawyer Mark Weisleder said that these low-ball listings sell for 5 to 10 per cent below their genuine value. This generates competitive bidding wars that lead to grossly inflated sale prices, with some even ending up as much as $1 million greater than the listing.
“[This is] extremely stressful and essentially unfair to buyers,” Weisleder told the Financial Post, adding that the strategy misrepresents a high-priced property as a bargain and only serves to inflate the average cost of a purchased home in the city.
Industry players don’t seem to see much wrong with the method, however, as they note that bidding is unavoidable in Canada’s most active housing market.
Real Estate Board of Greater Vancouver president Darcy McLeod said that this is “one possible sales strategy that [they] can use,” especially in a sellers’ market.
“As a result, a significant percentage of transactions would have competing offers,” McLeod said, alluding to the local market’s last 10 months, which saw 40 per cent lower prices in listings and 30 per cent higher sales prices.
“It is the listing agent’s duty to attract as much interest to their client’s [property] resulting in the best possible price,” realtor Andrew Hasman agreed.
Industry professionals added that while the phenomenon is commonplace, it is not the end-all, be-all of selling in Vancouver.
“We significantly reduced the price for one week to get a multiple-offer scenario. However, the offers we received were not satisfactory, and the seller did not agree to sell. We then moved the price back to the original listing price, which it sold at in the end,” listing agent William Ye offered by way of explanation for a recent transaction. Ye said he was acting in behalf of the property owner, his father.
A myriad of factors from foreign capital to economic recovery have been suggested as the main drivers of the continuous increase in Vancouver real estate prices, but an industry observer pointed at a more disquieting possibility: properties listed at prices way below market value.