by Paul Cowhig, Advisor, Professional Standards
When I look at a listing, I make the assumption that the property is for sale at the posted price.
Seems reasonable doesn’t it?
We all seem to know that, generally, you can’t offer a specific product for sale at a specific price and then refuse to honour that specific price or replace the specific product with something else. It’s called “bait and switch,” it’s false advertising and it’s illegal.
Or is it?
Well, some of the time it’s illegal, but my understanding from discussions with Council, is that it’s only illegal for those parties “engaged in that business.” Our typical sellers aren’t in the business of real estate, so they are not captured by the law in this regard. We act for them through our legally established agency relationships so, if they are not captured by the law, the logic goes neither are we. That’s why agents will sometimes underprice a listing to attract attention – because they can. It’s a deliberate, legitimate strategy but the public, certainly the buying public, and I believe most agents, hate it with a passion. Let’s be honest, it’s deliberately deceptive. It’s a trick to get attention, especially when the market appears to be slow like it is now.
In the legal world, a listing is considered “an invitation to treat.” In other words, someone is willing to enter into negotiations. However, it is not an offer per se and can’t be accepted as such or form part of a binding contract. That’s why a seller is not obligated to sell their property at the listed price. Refusal of an offer at the listed price and terms of the listing may obligate the seller to pay a commission because of the wording in the contract, but they don’t have to sell.
One of the things I often talk to licensees about is the importance of managing clients’ expectations. The best way to accomplish this is to have comprehensive, factual conversations with clients about all the different aspects and possible scenarios regarding the transaction being considered. We want to educate our clients about what to expect at each point in the process. The more prepared they are, the less stressed they will be. The less stressed they are, the smoother everything will go. We never want our clients to be surprised or thrown off guard.
Deliberately underpricing a listing is a strategy we should explain to both buyers and sellers.
Sellers have the right to know this is a potential strategy to employ in order to draw attention to their property. We have an agency obligation to make sellers aware of all the options available to them so they can decide what they want their Realtor to do and offer their instructions.
Buyers have a right to know, before they ever start seriously looking at listings, that some of the listings they see may be strategically underpriced. So, tell them ahead of time. Knowledge is power. Protect them from their own emotions. That’s part of your job as their Realtor. They are hiring you because you know things they don’t. If you don’t share that knowledge with them, you’re of no value to them.
The other thing I want to mention is this. We cannot criticize other Realtors whose clients opt to use this strategy or whose clients don’t. This is a great example of how to apply Standards of Business Practice Article #19 to your everyday conversations:
19. Discrediting another Registrant
A REALTOR® shall never publicly discredit any other Registrant. If the REALTOR®’s opinion is sought, it should be rendered with strict professional integrity and courtesy.
My advice to you is this, no matter which side of the fence you’re on regarding the practice of underpricing listings, remember Article 19!
My personal experience shows that underpricing a listing reflects badly on Realtors, even though it is the seller who ultimately decides on the strategy. When I get calls from the public, which I do, outraged by the deception of a property being offered at a price the seller has no intention of even considering, they aren’t upset at the seller. They’re upset at the agent who listed the property. It’s Realtors who look like devious snakes in the grass. However, in this province, at this time, underpricing is allowed and may be a strategy that sellers want to use. We need to allow for this possibility.