We’ve all had this experience before. If you’re an agent browsing MLS, a prospective buyer who’s just received an email outlining listings of interest from said agent, or a real estate junkie browsing Realtor.ca ore one of the many other ways the public is now able to view Real Estate available for sale.
This one listing catches your eye. It looks great! Surely, this must already have been sold…
“Oh my god, this is still available! It looks amazing! Could this be our forever home? Honey? How quickly can we get ready to drive to * insert generic address here *?”
Then, you notice something… Days on market is 37 days? That doesn’t make any sense. This house/condo/townhouse/loft/commercial space/laneway house/empty lot/etc. is perfect! This must be a mistake.
But it’s not a mistake. This seemingly perfect property is still available. The Toronto real estate market is too efficient to let this happen. Something must be wrong with it.
In order to find out, you probably would have to do further research. Check the property out, and explore many other factors. However, to save you time, I’m going to share with you three of the most common reasons that perfect property is still available for sale.
First, Location. Or as the old adage goes: location, location, location.
It’s often difficult to determine a suboptimal location just by viewing it on MLS. Sure, sometimes you can tell on a map that a property is right beside a highway or train line, located in a less desirable neighborhood in the city, or is far away from any convenient modes of transportation.
Just as often though, you need to go to the property to find out that the bedroom looks directly out into another condo unit’s bedroom twenty metres across the street. Or the backyard is directly downwind from the nearby sewage treatment plant (that’s a reference for you fans of How I Met Your Mother). Perhaps it’s beneath the flight route for the city airport, or there is a new condo just breaking ground beside the listing.
Regardless, location has and always will be the biggest factor determining the value of Real Estate, and oftentimes it’s difficult to determine the desirability of a units location just from viewing it online.
Another consideration is the current occupancy of the unit. People’s eyes aren’t immediately drawn to this field, but it’s crucial. Specifically, a tenanted unit can make an otherwise great unit very difficult to sell.
Tenanted units change the way a property can be presented. It can’t be staged, cleaned or painted. In fact, a tenant has the right to refuse photography in their unit also, so the photos can often be old and out of date. A tenant also has the right to 24 hour notice for any and all showings, and although it can be arguably “not fair” to sellers or buyers, a tenant can also make access difficult even with proper notice given for a reasonable time.
On top of that, tenanted units change the closing considerations, which can be prohibitive for many sellers. If a unit is on the market with a tenant during the initial term of the lease, it could be months before a buyer could get vacant occupancy. Even if the tenant is month-to-month, the tenant is entitled to 60 days from the first next of the month notice for vacancy. All that doesn’t even consider the possibility that the tenant will not honour the eviction notice, even if it’s a legal one. Imagine the nightmare scenario of buying a home, and upon closing you get the keys, only to find someone living in it that you expected to have left! It’s for all of the above reasons that tenanted units are significantly more difficult to sell than vacant ones.
With that said, the number one reason that a great looking listing hasn’t sold, is price. Ultimately, the Toronto real estate market is efficient enough in almost all circumstances to ensure any listing can and will be moved, provided it’s priced appropriately.
That’s not to say sellers need to have a firesale to move a challenging property, in fact many properties simply take longer to sell simply because they are more unique or niche. However, if a property has been available for a while, has no obvious warts, and is still available, a good predictor is that it’s overpriced.
Comparing prices in real estate can be easy (see: two condos one floor apart with the identical floor plan and exposure) and pricing real estate can be more difficult (comparing two homes in a neighborhood with different sized lots, different ages of finishes, different numbers of bedrooms and bathrooms, and a different access to parking. Nonetheless, most experienced agents can have a fairly accurate estimate of price after doing a market analysis. With that said, even that can be an imperfect science, and as a professional negotiator I can tell you that you can make data say a number of different things depending on how you splice it. That’s what makes the pricing factor so important.
In the end, the market dictates the price, and the market will speak. If a property isn’t selling, there’s a very strong chance that the market has determined it’s overpriced.
There you have it. There a number of factors that can keep a property from selling, but in most cases it’s simply a case of mispricing. Failing that, some common factors are an undesirable tenant situation, or a subpar location. With that said, there are countless other reasons that a property won’t sell as quickly as expected. If you have any interesting stories about that, please don’t hesitate to let us know. Or, if you’re looking to sell or buy, and want to know what about your property might give buyers pause, or why that listing you’ve been keeping an eye on is still on the market, give us a shout!
Otherwise, we’ll see you again on this space soon!
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