Have you heard the saying, “You don’t know the market has bottomed out until you’ve bounced up off that bottom, and are already on the way back up?”
Well the same can be said for when the market is going the other direction, and in May and June of last year, a lot of sellers and listing agents weren’t aware that we had rolled off an April real estate peak, and seemed to be two months behind.
As the market did continue to change, there was always a spring-like sale mixed within the pack, and you just hoped you didn’t find yourself up against six other bidders, in a market that was supposed to be cooling…
When we spoke last, my buyer clients, Amanda & Jake, had lost out on three bids for freehold properties: a semi-detached, 2-storey; a detached, 2-storey, and a detached bungalow, in Danforth Village, Caledonia, & Lambton. Three very different properties, in very different areas.
Through the first four months of 2017, prices were increasing rapidly, and each successive sale set a new benchmark for buyers.
The run-up in prices was unparalleled, as were the number of offers on some of these houses.
Yet here I was in June, with Jake and Amanda, trying to navigate a changing market, and deal with a cast of characters who either didn’t know the market was changing, or did, and didn’t want to acknowledge it.
We had come off a real estate peak, and the media coverage had gone from celebrity-worship at hot open houses to the-sky-is-falling rhetoric, and the average sale price in Toronto had dropped two months in a row.
Jake & Amanda had their eye on yet another house in Danforth Village (where we started, three offers ago), listed at $799,000, that probably would have sold for $1,000,000 easily back in March.
Having increased their budget for this property, on account of the location and the lack of work needed in the home, they told me they would go as high as $900,000, but I really thought they wouldn’t have to.
The house was probably worth $900,000, but would the market really bring the number up that high from a $799,900 list price?
I went to present my offer at the listing brokerage, and had multiple copies of “Page-1” of the Agreement of Purchase & Sale ready to go, with various prices, based on various scenarios.
When I arrived at the listing brokerage, I found not one, but two agents sitting in chairs next to me, which was odd, because I was told there was only one competing offer.
For many listing agents, especially inexperienced ones, keeping your cooperating agents informed as to the number of offers can prove difficult. And while I don’t mean the actual task itself is difficult, since it’s moronic in nature, the act of keeping agents informed often goes unfulfilled.
In this case, I suppose you could say the agent’s excitement got the best of him, and he simply “forgot.”
No big deal, right?
Except that not only do you have a legal duty to keep cooperating agents informed as to the existence of registered offers, but it would also work in your seller-client’s favour, since the more offers there are, the higher the price somebody would likely offer.
I went to present my offer after the other two agents, and once I was inside the room, one of the first things the listing agent said was, “…we still have a couple more offers to go through.”
I told him, “Well that’s odd, because I know there are only three offers, and I already saw two agents present.”
He replied, “Oh no, weren’t you told? There are actually six offers.”
But before I could say, “No, I wasn’t told, since you didn’t tell me,” he added this little nugget: “…..and one of the offers is my own.”
And with that, we were basically out of the running.
Six offers, and the agent – who doesn’t do a lot of business (I looked him up in IMS…) had his own offer.
I told my clients, and Jake said, “This house is going to sell for $915,000, I just know it. I have a feeling, and it’s a strong one, and I know we’re going to lose by fifteen-grand; twenty at the most.”
The listing agent called me later that night (when I know I’ve lost, I often head back to the office, or sometimes – home) to give me the proverbial, “Thanks so much for your offer, but we’ve decided to work with another.”
And the next day, to nobody’s surprise, I saw that the property had sold for $915,000, and the listing agent had double-ended it.
Ah, yes, – the double-ender! One of 2017’s hottest real estate topics!
Topic for another day, but regardless, this was our fourth loss inside of a 30-day period, and this one had a bit of a stink to it.
Less than two weeks later, we were at it once again, making an offer on a gorgeous, fully-renovated house on Leslie Street, in prime Leslieville.
This house, listed at $799,000, would have been a $1.2 Million house back in March, and must have been worth $1.1M today. It was just too good to be true, and when my clients first looked at it, I told them, “Don’t even bother, it’s so far beyond us.”
But they did look at it, and they loved it. Who wouldn’t?
So I told them, “Let’s keep an eye on it, and if there’s no action on offer night, we can always put our best foot forward, and see if the seller will play ball.”
But would the seller play ball? Even with the drop in the market, this had to be a $1.1 Million house, right? Or even a million? We were bidding on houses in the $800’s! We had no business looking at it!
Offer day came, and we registered our offer first thing in the morning, just in case there were buyers on the fence who would be calling all day to ask if there were any offers registered.
By 6:00pm, we still had the only offer, and as crazy as it sounds to bid $900,000 on a $799,000 listing, when you have the only offer, that’s what we did.
And it’s not crazy, because this was a $1.1M house, or should have been.
I got to the listing brokerage, and in walks an agent I know very well; a top-producing agent, who everybody in the industry knows, and I just thought to myself, “She has an offer. I know it.”
And guess what? She did.
As was the case the offer presentations in Danforth Village one week earlier, once again, I was caught off guard by the existence of another registered offer.
This time around, I don’t fault the listing agent. He’s as good as they come, and he told me about her offer within minutes of her showing up.
Nevertheless, we went in with our $900,000 offer, on this $799,000 property, up against one other offer.
I went out and waited in my car, watching people scoop up ice cream at Sweet Jesus on Queen, and the listing agent called to say, “Can you meet me out front of the brokerage?”
I knew right then and there, that the house wasn’t going to sell tonight.
It wasn’t a “yes,” and it wasn’t a “no,” but it also was too cryptic to have anything to do with price or the offer itself.
The listing agent told me, “My client will sell this property tonight for $1,000,000.”
I waited for him to laugh too, thinking he would crack a smile, since the idea of telling somebody who just bid $900,000 that they need come up a mere $100,000, but he was stoic, and I think he really thought we could do a deal.
So on the sidewalk on Queen Street, at 7:30pm on a warm summer day, I figured, “What the hell,” and called the other buyer agent over.
“He wants one of us to come up a hundred-grand,” I told her.
“I know,” she said. “But my people are out as well.”
I told him we were out as well, and he thanked us for our time and efforts.
Then the three of us stood there and talked about the market for twenty minutes, as though the preceding hour hadn’t happened.
The house was re-listed the next day for $1,050,000.
Two months later, the house was listed for $699,000, and sold for $912,000.
We were now 0/5 in offers, but this one didn’t sting since we knew it was a long shot.
The next offer, however, probably hurt more than all the rest combined.
I wrote about this experience at length in a June blog entitled, “What The Heck Is An Escape Clause?”
Read the blog if you’re curious, but let me sum it up for you now, and provide an addendum as well.
We were back in the Rockcliffe-Smythe area, looking at a stunning custom-built, 4-year-old semi-detached home, which you could only dream of finding at this price point, if you came this far out of the core.
Listed for sale at $799,900, the listing agent had set an offer date, which we had missed – and when we went to submit our offer, we found out that the property had sold, but of course, it just hadn’t been updated on MLS for a week…
But here’s where things get interesting: the property had sold to the listing agent’s own buyer-client, aka “multiple representation.”
But it was sold conditional on three thing: financing, inspection, and the sale of the buyer’s property.
I hadn’t seen a “conditional on the sale of buyer’s property” clause in my 14 years selling real estate, and I was shocked that the agent would advise his sellers to work with the offer.
But then, was I really shocked?
It was his client on the buy-side too.
He told me that there was an escape clause in the agreement, which was another aspect of an offer I hadn’t seen in a long time, and thus the door was left open for us.
I explained the situation to my clients, as well as the odds that were stacked against us, and we submitted our offer – well above the list price, and crossed our fingers.
Two days later, his buyer removed the condition and submitted a waiver to his seller, and the deal was firm.
I was shocked when I saw the sale price – about $30,000 less than we were offering.
And three weeks later, the strangest thing happened: I got a call from the seller.
In a 20-minute phone call, she cried, and explained to me that the listing agent hadn’t presented our offer to her in time for her to make a decision with respect to the escape clause. She wailed when I told her what our offer price was, seeing that money fly out the window, and it was worse when I said, “Our offer was also unconditional.”
I knew that agent was a sleaze from the get-go, as the 3-condition, sale-of-buyer-property, multiple-representation drama wasn’t something I had ever encountered before.
I told her to speak to her lawyer immediately, and he called me a few days after that.
I’ll never know what really happened. I can’t take her at her every word, but I think she was deliberately misled.
I’m not even sure if I ever told Jake & Amanda the conclusion of that story, since by the time I heard from the seller and her lawyer, we had already bid on several other houses.
You would think they’d be upset, as any buyer ought to be. But something tells me they’d draw upon that Buddhist, “Live in the present” mentality, and refuse to dwell on it.
Two weeks later, we bid on another house in the Caledonia pocket – our seventh bid in total.
The house was a detached, fully-renovated property, which once again, would have cost $300,000 more if it were 800 metres east.
Listed at $849,900, we figured it was a $950,000 proposition, but put our best offer forward at $920,000, up against two other bidders.
This was in the final days of June, and the market was really waning.
The listing agent, who acted as though he were on Million Dollar Listing, told me up front, “We’ll likely only do two rounds of bidding, probably working with the top three offers.”
It took all my strength to avoid laughing into the phone at his insanely misplaced sense of confidence.
He was acting as though it was March, not June.
He only ended up with three offers in the end, and true to his word – he “worked with the top three.” Somewhat fitting, and ironic.
I told him from the start, “We’re putting our best foot forward, don’t send us back because we aren’t improving.” And when he called to say, “We’re going to start a second round of bidding,” I told him, “Let me know.”
He called later to tell us that we had lost, which was a foregone conclusion.
That property was a longshot, but whereas in the spring, when you have a 0.00% shot of a longshot paying off, approaching July, we figured it might eventually pay off.
I didn’t like how the agent handled that listing. I mean, it worked – he got a great price for the house. But on a long enough time horizon, with that sense of false confidence and entitlement, he’s going to push buyers and buyer agents away.
“Rounds of bidding.” Really. In June? With three offers?
A funny thing happened after that bid, after we had lost our seventh offer in a 45-day period: we didn’t make another bid for a month.
It wasn’t intentional, it’s just the way things went.
The Canada Day long weekend came and went, and the market just wasn’t providing us with new listings.
Folks, I swear I’m not trying to drag this story on, but understand – nine offers is a lot, and unless I increase each blog post to 4,000 words, the conclusion is going to have to wait.
(TO BE CONTINUED…)