Why Would Someone List Their House For $1?

 

I have to question a seller’s frame of mind when a realtor suggests listing their home for a dollar.  To me, this one of the silliest gimmicks  in selling in this market or any market.

There are so many reasons in which this tactic fails.

What got me on this topic was I recently saw a listing with the list price of $1.  The only reason I actually found it, was I was pulling monthly sold housing statistics for a particular Toronto east end neighbourhood, so my search parameter included all price ranges.  I know this area well and I can honestly say I had no idea it was for sale.

As a realtor this was a ghost property.  If it’s not on my dashboard, then it definitely won’t be on any buyer’s radar.

It would be great to hear the conversation between the realtor and the seller when they both agree to this listing price.    I think it would go something like this.

“So we have gone over all the recent sold properties and we know what your home will most likely sell for”. “However I have an idea, lets not list your home at market value but instead lets list it on MLS for a dollar”.

Agreeing to list your home for $1 is extremely damaging to not only your market exposure but your negotiating position as well.

Lets first look at what problems you will be encountering in getting potential buyers to find your listing.  The house is now on mls.ca for all to see with a list price is $1. Most buyers know their price range when they are searching for home.  I doubt if they are looking for a home for say $750,000 they would be looking for homes listed at a buck as part of their search criteria.

Buyers are extremely focused in the housing type and price when they scan mls.ca.  What this seller and their agent have accomplished is to severely limit their potential buyer pool.  It is pretty difficult to sell a home if no one knows it’s for sale.

The other major issue with this dollar tactic is what is the actual home’s value.  Is it $750,000?  Maybe it’s $850,000? Or possibly $950,000? Your guess is as good as mine.

If the seller is unwilling to provide a list price, then what they are doing is deferring establishing the home’s value to the buyer.  There is absolutely no tactical or strategic value for any seller to give up setting their home’s price to another party.

So the buyer and their realtor are now going through the same comparable listings which the seller and their agent pulled.  As they are looking to establish the true market value of the home, what do you think they will be saying? “Hey, I think this house is similar to this highest price one”.  NO.  They will go with the listing which sold at the lowest price.

Now we have negotiations totally topsy-turvy .  Here the buyer will be offering the lowest price, where now  the seller will be forced to justify a much higher price.    Not a position any seller wants to be in, but they are one who agreed on this one dollar list price.

Since they continue to be invisible to most buyers this will be on the market for a while.

The end of this story is it took 35 days to sell and it got about 10% less than what it should have sold for.