Why Is That House Listed for $1?

A few times a year, we see a Toronto house get listed for $1. The media inevitably picks up the story and our phones start to ring. But is the $1 listing a good idea?

Truth: the $1 listing price strategy is usually a (desperate) attempt by a Seller/their REALTOR to sell a house when they either:

a) Don’t know the value of the house; OR

b) The house has been offered for sale for some time at a price higher than Buyers want to pay and the Seller/their agent feel that a different strategy will bring in the price they want.

Just last week the Toronto Star picked up the story of a listing in the Junction that’s listed for sale for $1. It’s been on the market for a few months at different prices, and now the listing claims that ‘Best Offer Wins For Sure 100%’ – despite the agent telling the Star that he won’t accept less than $700K.

Before I get into my opinion on the $1 pricing strategy, I did a little digging and pulled up the histories of all of the houses across Toronto that have been listed at $1 in the last 2 years:

Attempted Sale #1 (in the Bridle Path)

• Originally listed at almost $19 million, this one has been on and off the market for 2 years. The $1 price was an attempt at an auction after an unsuccessful 477 days on the market. Alas, it was not successful and this home has slowly been reduced to its current price of $8.9 million. We’ve seen unsuccessful auctions repeatedly in Toronto (unfortunately).

Attempted Sale #2 (Weston-Pellam Park)

• When the original listing price of $450K didn’t bring a buyer in 46 days, the price was reduced to $1, where it sat for 28 days (where we assume no one offered an acceptable amount to the Seller.) The price was subsequently raised to $375K for 28 days, taken off the market for a few months and re-listed at $498K for 132 days, when the listing was terminated. Property not sold.

Attempted Sale #3 (Danforth)

• This house was listed at $1 for 21 days. It did not sell and was not re-listed for sale on the MLS.

Attempted Sale #4 (Birchcliffe-Cliffside)

• Listed for $1 for 11 days – sold for $1,040,000. Success!

Attempted Sale #5 (Little Portugal)

• Originally listed at $1.2 million, this home sat on the market at various prices (both lower and higher than the original price) for over 150 days before the price was adjusted to $1. After 8 days, the listing was terminated. No sale.

Attempted Sale #6 (Bedford Park)

• Listed for $1 for 8 days. Re-listed for almost $1.3 million. Sold 36 days later for $140K less than asking.

Attempted Sale #7 (Caledonia-Fairbank)

• Listed for $1 for 21 days. Sold for $500K. Success!

And that sale in the Junction? It didn’t sell on ‘bidding war’ night but successfully sold 4 days later at $655K.

As I have long suspected, the $1 pricing strategy has rarely proven successful. Here’s why:

• An asking price serves as an anchor. Sure, we see sales $200K, 300K and even 900K over asking (that happened just this past week), but it’s a starting point that Buyers seem to need to help them decide how much a house is worth. Where to begin when the asking price is $1?
• Great REALTORS know to stage, price and market a home. While there are exceptions, an agent who doesn’t know how to price a home likely doesn’t excel in the other skills required to sell a home either. Don’t even start me on some of the photos in the above examples.
• Buyers are tired of games. Toronto Buyers suffer enough in our current under-supplied market and even they have a limit. The $1 listing seems to be it. The Junction listing resulted in a few angry articles like this one.
• Most Buyers (and their agents) set a minimum price range when searching homes for sale. The $1 listing gets missed almost every time. It seems dangerous to count on the media to generate a Buyer and exclude the motivated Buyers already searching on the MLS.
• The $1 listing doesn’t bring in qualified Buyers who actually have the money to buy the property. Every time a house gets listed for sale at $1, I get a call from someone who tells me: “I never thought I’d be able to own a home in Toronto until I saw this. I’d like to buy it right away. I’m even prepared to pay up to $500!”.  Truth.
• Sellers always have a bottom price they are willing to accept, and the $1 listing rarely results in that price. Based on the historical pricing of many of these homes that didn’t sell, it’s fairly easy to ascertain that the Seller wanted more than market value. I’ve said it before and I’ll say it again: Toronto Buyers aren’t dumb. They aren’t going to pay more than market value just because of a manipulative asking price strategy.

While there is certainly a case to be made for a $1 listing for a home that will be auctioned, there is inevitably a reserve price that must be met for the sale to go through. Sadly, no, you aren’t going to buy a mansion for $10,000 (at least not in Toronto).

So should you list for $1? I think you’d be better served by hiring a talented REALTOR with a track record of success.