Does bad publicity hurt property values?

A negative television news story, a condo's name splashed on the front pages of a major daily or an ongoing negative website from a disgruntled owner have little influence on the number of re-sales in a given condo. Nor do they hurt selling prices.

They may prove temporary embarrassing for the directors and property manager and worry the owners who are trying to sell their units but very little harm is done. The cats will still have kittens and the milk will not turn sour.

Here is proof of what I say.

Brothel and chemical lab
In January 2011 the CBC TV News aired a special report on a brothel that operated out of a unit in a Sheppard East condo for the previous ten years. Complaints to the board, the municipal politicians and the police were ignored. It took a prime-time television news report to get it shut down.

Less than a year later, this condo was back in the news when the discovery of a chemical lab caused a building evacuation.

Was the public shocked that prostitutes were servicing their johns out on a condo balcony? Would people want to live in a building that had a drug lab?

Yesterday's news, like last night's dreams, fade quickly as they are replaced by a never-ending supply of equally disturbing stories. So it should not be surprising that selling prices at this condo rose from around $120,000 in 2011 to $190,000 in early 2015.

Marina Del Rey Phase I
Christina Sobolak writes:
"Some condo owners, former and current directors of the condo board, a real estate agent, and a real estate Lawyer / fellow condo owner don't want you to read my blog.

They want it shut down."

"I spoke with the real estate agent who represented a potential buyer—they were concerned about the lawsuits, reports of leaking windows and pipes. Rightly so in my opinion.

Others potential owners were advised not to worry, and they purchased units at our building anyway.

Most condo owners don't care!  They were advised by our insurance lawyer two years ago, then once again by the Board of Directors at our last annual general meeting that it is all being taken care of by the condo corporation's insurance.

It has not stopped many from purchasing units in our building. In fact, sales have been very strong."

A devastating website
A few years ago, an owner of a unit in a North York condo hosted a website that was extremely hard-hitting. It showed that the condo was a financial, physical and political mess. It showed cars that were vandalized in the parking garage, serious water leaks, neglected amenities, crumbling concrete and pointed out that the city issued a number of work orders.

Reading the site caused several owners put their units up for sale and a few potential buyers immediately lost interest. So did sales dry up?

Nope. During the time that the website was active, more units sold than ever before and the selling prices didn't drop, they actually rose a little.

Sure some potential buyers looked at the website and decided not to buy there but most buyers don't do any research at all.

The remarkable thing is that when the website was removed from the Internet, the number of sales dropped although there was no reduction in selling prices. The website had no impact on the sales numbers what-so-ever.

Condo advisory
This American website allows residents in the GTA to anonymously rate their condo. The condos that have negative reviews don't seem to have been harmed.

The Channel scandals


Toronto Star headline—15 September 2011

On 15 September 2011, a number of condo corporations made headline news when Manzoor Khan skipped the country with up to $25 million, or more, after committing a series of loan by-law frauds. This was a huge newspaper and TV news story.

Does anyone remember the names or addresses of any of the condos he victimized? Yet some of those condos are still paying off the loans that he stuck them with.

Operation Traveller


In June 2013, Toronto police made a huge raid on four condos on Dixon Road. The address and photos of one of those condos was plastered all over the country's television screens and on the front pages of all of Toronto's newspapers.

No condo building received more bad publicity in national prime-time television newscasts and in the headlines of all Toronto newspapers than 320 Dixon Road in June 2013.

Did the news that the Dixon City Bloods, a guns and drugs street gang made that building their headquarters hurt sales and drag down property values?
Not at all. Prices are rising to levels not seen in years.

Here are the selling prices for similar two-bedroom one-bath units:
October 2013 $49,000
July 2014 70,000   43% increase
September 2014 75,000   53% increase
December 2014 84,000   71% increase
March 2015 93,000   90% increase

A three-bedroom unit in this building rents for $1,425 a month so rental income has not been affected.

Owner websites
An owner at YCC #42 hosts a website showing poor maintenance and an obvious lack of pride by the management and residents of 320-340 Dixon Road. The photos show dead mice in a hallway, mouse feces in the ceiling lamps, a broken garage door that took two months to get fixed, burnt out lighting in staircases and an un-shovelled staircase after a snowstorm.

The impact this sites has on sales? None. Was the website successful in pressuring management to fix any these housekeeping, security and safety issues? Nope.

A website helps the board
I figure that bad publicity helps a condo that is poorly managed or is in financial difficulties by warning the more sophisticated potential purchasers to stay away. A dysfunctional board doesn't want the better informed purchasers—the ones that would be the most likely to challenge the board if they buy a unit and then found out that they made big mistake—to become owners in their corporation.

Informed buyers
Informed consumers are a small minority.

Most buyers do not do any research on the condo corporation they are planning to buy into and often they will not even take a full tour of the building, the amenities and the parking garage. Next to no one will read all the information that comes with the status certificate let alone search the condo's name, corporation number and address on the Internet.

If the lobby looks reasonable, the hallways clean and they like the unit, then they look at the price and the monthly fees. If it seems affordable they'll put in an offer. They are not likely to notice that anything is amiss until after the sale.


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