Polar Vortex But Have You Heard of the Greed Vortex

This winter we are all familiar with the term Polar Vortex, but there is also another phenomena which is as equally damaging it’s the Greed Vortex.    What creates a Greed Vortex?  It’s where two forces collide and creates an isolated listing which has no reflection of what is presently going on the rest of the housing market.   The first force starts with this busy east end Toronto agent who sold them the original house and  combined with an over inflated the renovation’s resale value then the perfect Greed Vortex is formed.

I unfortunately see this situation too many times.   This is where a buyer and their agent saw bungalows in an east-end Toronto being picked up for $350,000 and $400,000 and then having a complete second floor addition added and selling for between $800,000 and $950,000.  It sounds the perfect way of picking up an easy $150,000 profit, but unfortunate in this scenario the seller will be luck to break even.

What happened is the buyer assumed (wrongly) by hiring a busy east-end real estate agent they would be the perfect partner to help them reap a big win-fall.  Sorry, not this time.

Let me run you the facts on this listing:

  1. It was purchased in the Spring at $355,000
  2. Following 4 months on renovations it was re-listed in the fall at $799,000
  3. After 3 weeks and no offers it was reduced to $749,900
  4. After another 3 weeks it was slashed to $699,900
  5. Now in Jan 2014 it is listed at the desperate price of $599,900

In this swirling isolation, the Greed Vortex has managed to cripple any potential for a profitable sale.  Like any vortex they are very localized and as well have a tendency to lock themselves down for a long time.

The first mistake started with the initial purchase of $350,000 bungalow.  This would have been a great purchase if the house was around the corner on a quiet street, however this house was on a busy well-known street.  The listing price once the renovations were completed started at the over inflated price of  $200,000.  This busy agent certainly helped fuel the seller expectations and together they managed to build themselves an impenetrable silo.

So in this incredibly active seller’s housing market this listing has managed to make themselves invisible to any potential buyer.   To avoid your own Greed Vortex you have to be realistic in your selling price and profit margin.   For this house the original list price should have been $699,000.  For our seller that would have been a profit of $90,000 or 18% which is a great return for 4 months work.

Getting caught up in the Greed Vortex is a cold and lonely place which is guaranteed to suck you dry of any potential gains.