Buying Real Estate With A Gun To Your Head

Well, how was your weekend?

I’m sorry if I soured your Monday morning with a headline like what you see above, and a photo like the one you see below.

But I don’t want to sugarcoat anything, and given what a client told me last week, I figured I’d use his quote directly as the impetus for this post.

“David, I’m not buying real estate with a gun to my head.”  I don’t blame you, but in this market, you often have no other choice…

GunToHead

I don’t think I’m a negative person.

Sarcastic?  Absolutely.

Cynical?  It’s unavoidable in 2016.

Condescending?  Yes, but when you’re sarcastic and cynical, you’d be lost without condescension.

But am I negative?

I don’t like to think so.

Somebody told me last week, “Your blog posts seem so negative.”

To be quite honest, I was a bit hurt.

I put a lot of effort into these blogs, but I clearly don’t have to tell you guys that.  Monday, Wednesday, and Friday; 1,800 words, interesting, informative, entertaining, relative, and real.

And maybe that’s where the negativity comes into play – on account of the “realness” of what I write.

I write about the 2016 Toronto real estate market, which isn’t fun for a lot of people.  It can be difficult, frustrating, and often depressing.

So after a weekend of pondering this “your blog posts seem so negative” comment, I concluded that I’m not negative, and perhaps my blog posts aren’t negative either, but rather the 2016 Toronto real estate market, in many cases, leaves people in a negative frame of mind.

And so what do I start off with today?

A gun to somebody’s head!

Is that negative, or real?

At the risk of sounding like a broken record, because I’ve said this every six months for twelve years, this is the toughest market I have ever worked in.

The condo market in 2009 was insane, when every damn unit in the downtown area had multiple offers on it.

But overall, given the housing and condo markets – the spring of 2016 has been the most difficult.

We’ve established the cause – far more demand than supply.

And we’ve pointed out one trend that certainly doesn’t help – bully offers.

The result, is the toughest market in which I have ever worked, where houses sell “out from under” people every day, and as I wrote last Monday: you live in perpetual fear.

Last week, I showed a house to my buyers one day at 11:00am, and we were out of the house by 11:45am.

They mulled the house over, and even though they were only inside this million-dollar-plus home for three-quarters of an hour, it took them less than three hours to call me back and tell me they wanted to make an offer.

I talked to them shortly before 3pm, and I called the listing agent and left him a message saying that I had clients interested in making an offer, and would he be so kind as to call me back.

At 4:45pm, I got a call back from the agent, who said he had a registered offer, and he would be presenting it at 6:00pm.

I asked him, “When does the offer expire?”

He told me it was good until 11:59pm.

“Oh great,” I said.  “So we have time on our side.”

To my surprise, he simply reiterated, “I’m going to present it at 6:00pm.”

I was a bit confused as to why he wouldn’t do everything in his power to stall to get a second offer on his listing (the first offer wasn’t his, fyi), but that’s a topic for another day.

I called my buyer – one of my buyers, and told her the situation: we had less than an hour to put an offer together, and move forward on the property.

Originally, our plan was for me to speak to the both of them at 8:00pm when her husband was finished work, as he had a slew of questions about the property, the process, and the offer itself.  But here I had the unfortunate task of telling her that by 8:00pm, this property would likely be sold.

She told me she would call me back when she talked to her husband, and I waited.

It was about 5:00pm, and I was driving downtown for an appointment, but time seemed to be moving at an accelerated rate.

I had sixty minutes to get this thing together, or risk losing out.

I had a client who I was going to meet at 5:30pm, who was depending on me, and the logistics of meeting my buyer clients and getting them to sign an offer, so I could rush back uptown and present for 6pm, were seemingly impossible.

I called a colleague of mine, looking for a favour, and he said, “Lemme call you back in ten.”

I found myself shouting into the phone, “THERE’S NO TIME!”

I felt like Jack Bauer from “24.”  Or Johnny Depp in that awful movie “Out of Time.”

My colleague said, “Relax, let me call you back in five.

Five minutes at this point was a short eternity.

The listing agent was texting me, asking, “Are you coming in with an offer?”

I found this to be unbelievable, given that he took over an hour to call me back, and now it had been less than twenty minutes since he told me about the existing offer and his 6pm presentation.

My client called me back, and said she hadn’t reached her client as he was in a closed-door, arbitration meeting, and could not sneak out for even one minute.

I asked her, “Do you want to offer on this house?”

She said, “Oh gosh, absolutely!  Please don’t think we’ve changed our minds or anything.”

I said, “Then you have to get creative here and find a way to reach your husband.”

Time was ticking by, and now I was at my 5:30pm appointment.  I felt incredibly rude as I continued to check my phone, but it’s tough to be in three places at once.

My client texted me back and said, “I can’t reach my husband, we need more time.”

Again, I had the unfortunate task of telling her that there wasn’t any time, and we had a half-hour to decide what to do.  If they decided they wanted to move forward, I could call the listing brokerage and register an offer, thereby putting my foot in the door.  Feel free to chime in here and tell me that an offer isn’t an offer until you have a signed “Form 801” from your buyer, but what can I say – my job is to get deals done for my clients.

At 5:50pm, my iPhone dinged, and it was the husband.  The message:

SORRY DAVE, NOT BUYING REAL ESTATE WITH A GUN 2 MY HEAD

And that was that.

I called the wife back to chat things over, as I was now in the car, free to speak once again, and she apologized profusely, saying, “It’s just too fast for us!  Imagine us scrambling to make a decision in thirty minutes?”

I told her not to apologize.  In fact, I apologized – for our market conditions, for the system we have in place, and for the situation at hand.

I finally connected with the husband around 10pm that night, and I told him the property did indeed sell.  He too wondered why the listing agent wouldn’t wait for us, and I agreed that it was odd, but there’s often a lot of “chatter” about offers, and ultimately the listing agent has to decide if a bird in the hand is worth two in the bush.

He told me that he had never felt such immense pressure in all his life, and yet he dealt with a high-pressure job every day.  He couldn’t believe that he only had thirty minutes to decide whether to pull the trigger on a $1.6 Million house.

I sympathized, but I had to tell him that this wasn’t unusual in our market, and while I wasn’t happy about the situation, it was something he had to be prepared for as our search continued.

And that’s the truth, folks.

You have to be prepared to make a quick decision in this market, and while the market bears will say that a “quick” decision means “bad” decision or “uninformed” decision or that somehow buying in today’s market, with today’s systems in place, is a self-defeating prophecy, I’ll be the first to tell you that it’s not.

It’s reality.  It’s what we have in place, and you either accept it, or you sit on the sidelines and wait for change, like all the people who said the market would drop in 2006, and have been renting for a decade, watching a metropolis built around them.

Sometimes this “gun to your head” mentality gets under my skin.

Last month, I was in an 12-offer competition for a home, and we were told that the top three were all “really close” and we’d have the opportunity to improve.

But we were also told by this snide, piece of crap listing agent, that we “only had ten minutes.”

Man, did that piss me off.

I pictured this agent, sitting at the dining room table with his sellers, with three incredible offers in front of them, and nine other offers in a pile to the right, looking at their watches and thinking, “What’s taking these three buyers so long?”

My clients wanted to talk things over, as they should have.

They were first-time buyers, looking at a $750,000 property, and the idea of adding $15-$20K, when they were already at their max, was a big decision.

The listing agent called me about eight minutes after he told me we had ten minutes, and said, “How are we doing?”

How the hell do you think we’re doing, pal?

He said things like, “We’ve all got things to, bills to pay, people to see, d’ya’know?”

He actually said, “I want to wrap this up, slap a little bow on it, and put this baby to bed.”

Sure, that’s all well and good, but he did call me to say that his clients wanted more money for their home.  I know, he actually said, “We’re giving you the opportunity to improve your offer,” but we know what that actually means.

Fifteen minutes after he called to tell me I had ten minutes, which was about twelve minutes after I told my clients where we stood, and about eleven minutes after he called me for the second time, he sent me a text message saying, “We’re going to move forward with one of the other offers if you don’t re-submit asap.”

It didn’t make any sense to me.

Time was not of the essence here for his sellers, and they stood to get more money for their home if they waited an hour.

I called the listing agent back, because I find text messages impersonal, and I tried to rationalize and calmly explain to him that the decision isn’t so cut-and-dry for every buyer, and they still had to sign and initial the changes.

But he didn’t care.

He said, “If your clients haven’t decided by now, they aren’t moving forward.  We got one of the three offers back, it’s good, it’s clean, it’s a big ball of cash, and we’re gonna write a deal here.”

So now he was a psychic as well.

My clients did come up by $10,000, and I resubmitted the offer about twenty minutes after he told me we had ten minutes, but the other offer beat us by another $10,000.

Still, the listing agent couldn’t resist replying to my email, and saying, “Too little, too late.  Wouldn’t have mattered what you offered.”

What was that about?  He’s saying if I had the top offer, he would have told his clients to accept the second-highest, because it came in nine minutes earlier?

It was bizarre.

And my clients were okay the next morning, as they believed in karma, and didn’t like the “vibe” that the offer process gave them.

Talk about buying real estate with a gun to your head…

Not all offers in Toronto end up like this, but if I can tell you two stories like the ones above, that happened within the same 4-5 week period, then that should tell you that ultimately you will feel the gun to your head in this market, like it or not…

15 Comments

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  1. Gloria says:

    Jeez this post really struck a nerve with me. I’ve been in both situations where we were forced to make a decision to buy quickly, and to sell quickly because threats were in place by surprisingly our chosen agents and boy was that a nightmare! Honestly, whether you’re buying or selling, you will feel the pressure of having a gun to your head. Sellers don’t win, buyers don’t win. It’s really the realtors who win (by getting the deal done). And sadly, both the buyer and sellers never will actually really know what the whole negotiation process really was about. With such unheard of trends in real estate we see in the past few years, the business of real estate trading really needs to be regulated.

  2. Free Country says:

    I commend the prospective buyer for walking away. He will thank himself and sleep soundly for not making a rushed, pressured decision.

  3. […] And speaking of buying with a gun to your head, our friend David Fleming over at Bosley wrote a piece on his experiences as of late and a lot of the lessons apply to the condo market as well. You can check it out on David’s blog. […]

  4. Natrx says:

    I would love to hear more stories like that. It would definitely generate alot of interest for readers.

  5. condodweller says:

    David, it’s all about setting expectations for your clients. If you are not preparing them to make a decision sooner than they expect they are going to feel like you are holding a gun to their head. Those of us reading your blog are aware of the market conditions, however an average client who just wants to buy a house may not be. It’s like Scotty said, whenever I tell the captain it will take 4 hours to fix something he thinks I’m a miracle worker when I do it in 2. If you prep your client to be ready to pull the trigger in 5 minutes, he will be happy that you are giving him a whole hour!

    Regarding being negative, people tell me I’m negative all the time when I say it like it is, but they never tell me that I was right after the fact. When you make the decision to call a spade a spade you have to accept the fallout. People don’t like the truth when it’s bad news.

  6. Appraiser says:

    “I can’t blame the majority of society for feeling negative about the current market situation.”

    What is the basis for this statement? Do you profess to speak for the majority of society? The majority of Canadians are homeowners (~70%), do you think they share your opinion?

  7. AndrewB says:

    Reading this post infuriates me David! Only because it highlights how absolutely chaotic and free for all the offer system is. There’s no accountability to the process and no transparency of putting in offers. So buyers feel jaded by the bully offers and all the other chaos that’s part of the process. Sellers are smug. Processes are rushed in what is supposed to be a careful decision, pulling the trigger on such a large purchase. I can’t blame the majority of society for feeling negative about the current market situation. If it were more organized and there were proper rules to be followed in regards to viewing offers, etc. It would probably be a different situation.

    1. jeff316 says:

      Meh, this is a boring old yarn that is just an emotional rant from buyers that don’t like the dynamics of a hot market. It’s natural, but dishonest.

      Process? Transparency? For what purpose? To make the weak-kneed feel better about their purchase? To what end? You want to constrict someone’s ability to sell their house, or buy another house, because you’re not up for it?

      Accountability? Let’s be real here, people kvetching on this are only interested in accountability as it benefits buyers. Why should the system be set up to suit buyers and not sellers? What experience does this crowd have in selling a home to know that the system is biased toward sellers? And accountability to whom? For what?

      Bully offers? Jesus take the wheel! Bully offers are nothing more than the first-come-first-serve bids of auld! The auld that we all pine for!

      The problem is a lack of supply. You can put in all the process, transparency and “accountability” you want the lack of supply will still exist, the pressure will still exist, and restrictions on the market will likely increase prices.

      I mean, let’s get real here — it’s kind of funny — because David’s story here shows an instance where this “chaos” and “free for all” resulted in:

      a) an efficient sale of a house;
      b) the avoidance of a multiple bid scenario;
      c) the removal of additional buyers that weren’t serious in the first place; and
      d) the sale of a house to a prepared and effective *buyer* at a lower price than the market could probably bear!

      And yet, this is a sob story for buyers? Yawn.

  8. Donald says:

    I can empathize but not sympathize.

    I’ve bought a house 15 mins after seeing it – had to bully the bully offer coming in that night.

    it’s unfair but that is how the market works – everyone thought I was crazy but had I not bought it, I would still be full of regret and the house is worth a lot more today than it was a few years ago.

  9. Paully says:

    It is not a negotiation unless you are prepared to walk. If more buyers and agents simply took a step back when sellers and their agents got that greedy, things might settle down a bit. As long as buyers are panicked about not winning the house, the whole thing continues to feed on itself.

    1. Kyle says:

      I have to disagree with you Paully. From what David described, the a-hole moves that the listing Agent was pulling weren’t about greed, in fact if anything they could have resulted in leaving money on the table. I also don’t think it’s realistic for buyers to walk away from the table if they really want to buy a house. They’ll just end up prolonging their search indefinitely. The reason Agents can get away with such douche-baggery is because of the market we are in. And until the market changes, there really isn’t much anyone can do about it. Given that there is a long line up of other buyers to take one’s place, walking away will have far more downside for the buyer who gives up than the Agent that behaves like a douche.

      1. jeff316 says:

        Agreed on both counts.

        It may make David’s clients feel better to be so sensational about it, but the reality of this market is that you need to act quickly and decisively. Having 1 hour versus 3 hours to think-over a purchase like this isn’t going to make a difference other than to soothe a buyer’s emotions over his/her eventual decision.

        I have no problems with someone admitting that these market dynamics are not for them – they wouldn’t be for me – but lose the eighth-grade dramatics and get out of the market til it cools down to a level you’re comfortable with.

        Re: bad listing agent tactics, it seems to me the listing agent is insecure about how a second bid will play out and just wants to get the sell locked down before any additional variables enter into play, regardless of whether that eats into his commission or his sellers’ profits.

        1. jeff316 says:

          Post got cut off on the last point…

          People constantly rage and pout about shoddy agents that use tactics to maximize selling prices (and therefore their commission) but I’ve always wondered if, in this hot of a market, the reality is that commissions are so high that five percent of an additional ten or fifteen grand isn’t worth the risk of a deal falling through. Do selling agents have minimal incentive to push sales prices higher and more of an incentive to get deals done?

          1. Long Time Realtor says:

            @jeff316:

            You make an excellent point. The math is really not too difficult. 2.5% of $1.5M is greater than 0% of $1.51M.

            As David points out, in real estate there’s always lot’s of chatter about potential offers, but it’s meaningless until it’s on paper and registered with the listing broker.

            In reality (although the agent probably shouldn’t have said it out loud), the goal is to wrap it up, put a bow on it and put it to bed. The sellers can then move on with their lives.

            In the long run, “getting it done” is far more important than a few thousand dollars either way.

  10. Marina says:

    When the seller’s agent is a POS like the one above, do you ever just want to walk away?
    I remember when we were buying 5 years ago, we actually nixed a house because the seller’s agent (or whoever he had working the open house) was a total slimeball. Made me feel like somehow he was going to screw us over.

    As for the gun to the head thing, I think in the end that’s what a “bully” offer is for… To bully out the other buyers. But it sure does suck for sellers. I don’t think I would pull the trigger on a $1.6 million house in an hour either.

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