Should Agents “Hold Back” Offers On Condos?

I know what you’re thinking, and yes, this is becoming a reality.

The saving grace for Toronto condo-buyers was always, “Well, at least we don’t have to ‘bid’ on properties like those miserable home-buyers.”

Well, all that is about to change; slowly, but if we continue along the path we’re currently taking, it won’t be long before this isn’t the exception, but rather the norm.

I don’t love it, but I understand it, and in many cases, I honestly can’t argue with it.  Let me explain…

HoldBackOffers

Nobody likes the “offer dates” in Toronto real estate.

But why would they?

They’re a constant reminder of how competitive our market is, and we really just want the world to act like it does on stupid real estate television shows – where you see three properties, talk about them over a drink, and then “pick” one.

They’re also an indication that the seller and listing agent are expecting the property to sell for more than the list price.

And last but not least, they’re a source of confusion, since most products and services in 2016 have actual PRICES attached to them, whereas a house or condo with an “offer date” has no fixed price.

But whether you hate real estate, real estate agents, the Toronto market, or all of them combined, in your heart of hearts, you know that the red-hot Toronto market necessitates it.

To not hold back offers on a freehold property is a mistake; it almost guarantees you end up with less money.  As as much as the buyers and non-members of the ownership fraternity here in Toronto might hate this, sellers do want the most money for their home.

It’s the way it’s always been, and it’s the way it’s going to be for the foreseeable future.  There just aren’t enough freehold properties available to satisfy the overwhelming demand, and as a seller or a listing agent, the prudent move is to allow a week for buyers to see the property, then allow as many of them as possible to submit offers.

Now that’s for houses, and save for a period in 2010 when the market was red hot, we’ve never seen hold-backs on offers for condos being the norm.

But the market for condos is hotter today than it was in 2010, and the product available out there, on the whole, is worse.  Combine those two factors, and we’re seeing a LOT more “offer nights” for condos.

What do I mean by “the product available out there is worse?”

I mean that there are 57 new listings for condos in C01/C08 today, and only a handful I would even consider sending to a client, let alone showing, let alone selling:

One is a parking space.
Seven are pre-construction.
Eight are assignment sales for properties not registered.
Five are on my “problem building” list.
Three are in old buildings I probably wouldn’t sell in.
Seven are in buildings I hate, and probably wouldn’t sell in.
Seven are in newly-registered buildings that are insanely over-priced, for no good reason.

That’s 38 of 57 listings that I’m discounting immediately, and this is a good thing if you’re my client.  I’m not putting you in anything risky, over-priced, or that will appreciate at a rate less than the market average.

This is a bad thing, however, if you’re an active buyer looking to make a move.  The amount of “quality” inventory is sadly lacking.

Now of the 19 listings that I would consider showing to a client, they’re not ALL $329,900, 1-bed, 1-bath units – if that’s what you’re looking for.  They’re across the downtown core, various sizes, various styles, and various prices.

So of those 19 listings, how many apply directly to you, and what you’re looking for?

Maybe…….one?

Or two?

Yes, folks, that is the market.

Maybe I’m more discerning than many agents, and many buyers for that matter.  But I don’t sell crap, and that’s why people like working with me.

Of course, sometimes my buyers get frustrated, and wonder if I’ve forgotten about them!  But that’s just the nature of our market – you might go 3-4 days without seeing something that’s even worth considering!

So if this is the market we’re in for quality, downtown condos, then doesn’t it make sense that sellers and listing agents are going to start holding back offers?

I hate it, trust me.

Every time I see it on MLS, I shout, “OH COME ON!”

But I understand it.

Let me give you an example…

A younger agent in my office came up to me on Tuesday and said he had a condo listing coming out, and asked, “Should I hold back offers?”

I sighed, since the mere idea bothers me, and I told him, “You’re going to piss people off with that.  I don’t even want to show condos when there’s an offer date.  It just reeks of greed.”

But then I realized that’s the buyer in me talking.

That’s the buyer agent in me talking.

And that’s me trying to stand up for buyers, and wishing the market wasn’t as hot as it truly was.

So I asked him, “What’s the listing?”

He told me it was a 2-bed, 2-bath unit in a building that I know quite well (let’s just leave the address out of this, to be fair to him), and in a location where there aren’t nearly enough 2-bed, 2-bath listings to satisfy demand.

I told him, “I don’t remember the last 2-bed, 2-bath unit to come up in that building,” and after doing a quick search on MLS, I realized it’s been seven months since a 2-bed, 2-bath unit was offered for sale.

In fact, only two have been offered for sale in the past 16 months.

Not only that, his unit has the sought-after southwest view, a balcony, and it’s upgraded.

So I begrudgingly told him, “Yeah man, I think you have to hold-back offers on that.  You just never know.”

You never know, that is, if you’re going to get two or more buyers interested.  And you never know if you’ll get three, or even more.  It’s possible, and you might say with a unit like this, probable that you get multiple offers, so not holding back offers is doing your seller a disservice.

Now the one major difference with the hold-backs on offers for condos, versus houses, is that with condos you’re not deliberately under-pricing.

I told my colleague it was worth $699,900, so he should list at that, hold back offers, and if he gets one offer, then beauty – sell it for list, and everybody wins.  If he gets more than one offer, then he and the seller are off to the races.

So with condos, you’re not trying to spark a bidding war, or deliberately mislead buyers (really only the naive ones left in this market…) by pricing at 80% of fair market value as agents do with houses.  You’re simply leaving the door open for the possibility that multiple buyers are interested.

As I said, I don’t love it, but I’m not Captain Fairness.  I’m an agent hired to work on behalf of the seller, and get them the most money for their property.  If I had a unique condo listing in this market, I’d seriously give thought to holding back offers.

Of course, some agents are just completely lost.

I saw this 65-year-old lady who works mostly in Lawrence Park list a Liberty Village condo today for about $50,000 less than it’s worth, with “Offers Most Graciously Reviewed On Monday, April 25th.”  I think she’s a bit out of her element on this one, and the “bidding war” that usually results on Fairlawn, or Joicey, or Cheltenham probably won’t follow suit on this cookie-cutter condo.

I saw a listing for a condo today with an offer date, and then the phrase, “Pre-Emptive Offers Welcomed.”  That really confuses the buyer; you’re holding back offers, but encouraging bully offers.  Do you even know what the property is worth?

And then I saw a unit which I feel is tremendously over-priced (agent is from Welland, Ontario) with, you guessed it, a hold-back on offers.  Maybe he reads the Toronto Star and just thinks “everything” in Toronto sells in a bidding war?

So if you’re a would-be condo buyer, and you’re looking at listings – seeing the “hold back” on offers, not every property with an offer date is going to sell over the list price.  There’s a lot of red herrings out there, and you really need to do your homework in this market.

The one thing I will say that’s positive about the “offer dates” for some condos is that at least it gives us a damn chance to see the property!

I made an offer on a small unit on George Street last week, the morning after the unit hit the market, and the agent told me, “Sorry, I sold this last night!”  The property had been on the market for no more than six hours before he sold it.  If there was an offer night, at least I could have thrown my hat in the ring.  Sure, I might have paid more than the list price, but had we got our offer in the night before we did, we’d have been in competition, and we’d have paid more than the list price anyways!

As I sit here typing this – 11:47pm on Tuesday night, I’m on pins and needles, waiting to see if an email hits my inbox with the words, “Sorry, we sold that unit tonight.”

A listing came out in a building one of my clients is dying to get into.  I last checked new listings at about 4pm today before I went out on appointments, and it wasn’t out yet.  I just sat down to check new listings about an hour ago, and there it is!  I want to show it on Wednesday, and with about 99% certainty, make an offer on behalf of my buyer.

But will the condo still be available?

Did the condo sell tonight?

If there was an offer date for this unit, I would have time to show it to my client, no matter what.

Time is a huge commodity in today’s real estate market.  Time for me, time for my buyer, time for his or her mortgage broker, and time for life – since we all have to live it, and be active buyers in this crazy market as well…

15 Comments

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  1. KatLyn says:

    I’ll echo H Marshall: Don’t rule out ALL old condos. I also live in a 40 year old complex. When I was looking for a condo a number of years ago, I quickly learned that an older building gives way more bang for your buck: larger rooms, big closets (I have a walk-in closet plus a “storage room” so no need for a locker). The building is very well-maintained and managed, and the fees (about $0.68/sq ft) includes water, hydro and even basic cable.

    1. H Marshall says:

      Yes. We have all that too except we have a premium cable package, two live-in supers, who are wonderful, and I have FIVE closets in the hallways. Looking outside, I see red-tail hawks soaring over the East Don River and the most awesome sunsets. Plus privacy!

      Smallest unit 12,00 square feet. Two bedrooms with a real den. Our property manager is a sweet-heart.

      David, please do a Pick 5 on some older condos. There are some in Etobicoke along the Humber River near Mill Street that deserve a look. Must be some near the downtown.
      http://www.condomadness.info/buying-advice.html

      1. Kyle says:

        I too think older condos are better value than newer ones. They generally offer better size, and location than the new buildings and they tend to be mid rises in established neighbourhoods, rather than high rises next to a highway,train track,brownfield,another high rise, etc

        These are definitely not cheap, but i think this is a pretty cool concept that i could see catching on in other older buildings, developers creating “new” old condos.

        http://www.thebenvenuto.com/index.php

  2. ericc says:

    I finally found a unit after a 3 month search, I was looking specifically for loft conversions and every single unit worth looking at had an offer date..

    Ended up buying mine with a bully offer.. Listing agent had “preemptive offers will be reviewed” so we took them up on that and hopefully won it for less than on offer day, who knows..

  3. H Marshall says:

    Don’t rule out ALL old condos.

    I live in a 40 year old condo at Bathurst and Sheppard and for families and older couples who want a home to live in for the long-term, there is little around here that gives more value for the money.

    No political fights to control the board, condo never had a special assessment or took out a loan. Very well maintained. “Single family only” provision enforced, no short-term rentals and a good location. How about there being only one proxy at our last AGM. ONE.

    Oh yes, 90% owner-occupied.

  4. Appraiser says:

    There is ample statistical evidence to support the narrative that the condo market in T.O. is sizzling hot.

    TREB mid-month data for April released yesterday show that condo sales in the 416 area code are up 29.3% year over year, with prices ahead of last year by 10% !!

    1. BillO says:

      Do you remember a few months ago (before the TREB numbers spcame out) Barry Fenton, head of Lanterra said on BNN he predicted condo prices to rise by about 30% in the next three years? Most people in various sectors of the RE industry laughed it off, but maybe he was on to something…

    2. Kyle says:

      It’s funny 2 years ago, many “experts” were predicting a flood of condos because of all the “over-building”. Much like the bubble burst predictions, these hypothesis also turned out to be worthless bunk. What David describes are all symptoms of supply not keeping up with the rate of new household formation. The reality is, there isn’t anymore easily developed land in the core, which only means the supply situation will continue to get worse over time.

  5. I like Logic says:

    I know there are reasons not to share this, but would you ever consider listing the buildings that fall into these categories?

    Five are on my “problem building” list.
    Three are in old buildings I probably wouldn’t sell in.
    Seven are in buildings I hate, and probably wouldn’t sell in.
    Seven are in newly-registered buildings that are insanely over-priced, for no good reason

    1. BillO says:

      Yes! Start naming names, or at least drop some serious hints in a Pick 5…or a ‘Do Not Pick 5’

      If I had to guess (obviously all of CityPlace is out), I’d imagine David isn’t a fan of Maple Leaf Square (busy area plus maint fees are nearly $1 PSF and the building is only 5 years old), as well as the Lightbox (after numerous falling glass in incidents) and possibly Boutique condos (have heard the sound proofing is atrocious). Come to think of it, is there any newer building in the core he even likes? I feel like all of his Condo pick 5’s are in his preferred King East/SLM neighbourhood, Regent Park (agree it’s good value, I have a unit there), or lofts on either the east or west side.

      1. Jeff says:

        Dave had a listing in MS squar, it was a 1.5 million ish condo but still was listed.
        I actually know someone (older divorced guy in finance) who took a look.

        He asked us young guys work what we thought, we told him he is 60 go to yorkville.

        1. johnny chase says:

          Man there are several lawsuits against the developer in this building. If not on his “bad list” it should be,

          1. GinaTO says:

            In Maple Leaf Square? I’d love to hear the gossip on those lawsuits 🙂 I remember when people were falling all over themselves to buy pre-con in MLS (at high prices)…

    2. Marina says:

      Also, what makes a building a “problem building” vs. a building you just hate? Just curious what factors you look at and how you evaluate them.

      That would make an interesting pick 5 – 5 buildings, not condos.

    3. condodweller says:

      @ I like logic

      Why would he share, that’s his competitive edge. Having said that, it shouldn’t be hard to figure them out especially if you work with a good agent if you don’t follow the market.

      Five are on my “problem building” list.
      Just look at recent articles on urbancorp both good and bad were listed.

      Three are in old buildings I probably wouldn’t sell in.
      These are the ones with high maintenance fees, low reserves, poor condition. Easy to tell.

      Seven are in buildings I hate, and probably wouldn’t sell in.
      This is the subjective category where you have to exercise some common sense or do a google search to see what people say about the building. I suspect these are buildings with high maintenance fees that don’t fall in the other categories, or the ones that are more expensive than similar near by buildings.

      Seven are in newly-registered buildings that are insanely over-priced, for no good reason
      Again, easy to tell.

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