How much would you pay for a property? That’s the age old question in the real estate industry.
Sellers set a price, buyers set their limit and hopefully a deal can be done.
So, what about $1 for a property? The topic comes up in local real estate circles from time to time and seems to polarize discussions – either you love it or hate it.
For example, a few years back, an Oakville, Ontario agent listed his client’s property for a buck. Now, you don’t have to live in the Greater Toronto and Hamilton Area to know that nothing – not even chocolate bars – sell for a dollar in Oakville. For example, the least expensive listing in Oakville on MLS at time of writing is $225,000.
This set of a firestorm of comments on real estate site Buzz Buzz Home. Proponents and opponents of this pricing strategy raised their voices.
Similarly, if you watch enough HGTV you will likely see a house-flipping host purchase a home for as little as $1. This happens for a number of reasons, but it is often a condemned, city-owned property that is set for demolition. The host/investor buys it in “as is” condition fully knowing that tens, if not hundreds of thousands of dollars will be required to make it habitable.
Of course, these are much different markets and situations than Oakville – one of Canada’s wealthiest communities.
Two things I would like to point out on this discussion. Given the strength of the market in Hamilton, it’s common for listing agents to price homes aggressively and hold off presenting offers to their clients for a few days after listing. This generates interest in a property and if all goes as planned, the strategy will result in multiple offers and the house will sell for above list price.
I recently presented an offer on a house for an investor client which was in a good area and priced very competitively. It hadn’t been occupied for over two decades and the last upgrade we could see was a semi-clean fuse. Yes, fuse. This complimented the knob and tube wiring, century-old furnace, asbestos tiles and obvious water damage in the main floor ceiling. On top of that, the scent of cat pee had clearly seeped into the original hardwood floors and the basement was wet. (But the bedrooms had great closests!) Knowing full well that at least $50-75,000 would be needed, I submitted a conservative yet above-ask offer. The successful buyer purchased the home with no conditions and paid $50,000 over asking.
The point here is that aggressive pricing is a common tactic and that the market will often regulate itself. If that same house were listed for $1 and not in the low $200,000s, its reasonable to believe that the sale price would be in the same ballpark, as that’s what a buyer is willing to pay. The difference maker between the two is the type of buyer they attract. The Oakville property was renovated and it’s target buyers are likely looking for something turnkey to live in. The latter property appealed to investors who make decisions based on numbers not emotions.
Ultimately, as an agent you are required to represent your client’s best interests. Sellers generally have an idea or a minimum price that they will accept for their house. Buyers know what they will spend. An agent’s responsibility is to ensure their client is comfortable with the final price, regardless of whether you list a property at $1 or just below fair market value.
But there’s always something to be said about being creative!