Continuing the theme from two weeks ago, I’d like to offer yet another “guest blog” from one of my team members.

As mentioned prior, we publish our annual INSIGHTS magazine every fall, and each member of our team authors an article on a topic of their choice.

Matthew had a very memorable experience earlier this year which made for an excellent story, so I want to share that with you today….

Well, it’s been a year since we last connected in this space and a lot has happened in that time.

The Maple Leafs let us all down again.  I got married (there’s photo evidence of this on the last page…), and David cut back from three posts on TRB per week to only two….but added a podcast.  That’s progress in our world!

But what about Toronto real estate?

There has been no shortage of compelling stories over the last twelve months, whether it’s the Bank of Canada starting to cut interest rates, the twenty-year low in unit sales, the massive decline in pre-construction condo sales (which we have never sold, for the record), or the resolution of the lawsuit against organized real estate in the United States.

However, I’d say the most interesting and impactful change to how certain transactions in the market occur was the introduction of new regulations governing organized real estate in this province as of December 1st, 2023.

On that day, we were officially introduced to the Trust in Real Estate Services Act (TRESA), which replaced the Real Estate and Business Brokers Act (REBBA), which had been in effect since 2002.

This new act ushered in a multitude of changes – the most headline-worthy of which was allowing the option for sellers to disclose the contents of offers received to other buyers and buyer agents in a multiple-offer scenario. In addition, a new Code of Ethics was introduced, there were changes to how representation is defined, and we were issued new standard forms to provide increased communication and clarity to the consumer.

With that being said, the most interesting change I experienced was the ability of a buyer or seller to operate as a “Self-Represented Party”.

Frankly speaking, it was always muddled how registered agents through RECO operating on the MLS could engage with a prospective buyer or seller who didn’t want to transact with a conventional agent, and these changes were a welcome update for both buyers and sellers.

But I would be lying if I didn’t say every agent was nervously anticipating the first time, they had to put this theoretical change into practice when they inevitably found themselves in a situation where an unrepresented buyer wanted to present an offer on a listing they had, or an unrepresented individual was selling a property which was a great fit for that agent’s buyer.

Besides the uncertainty of this new process, a small section of the public is keen to stick it to Realtors who they believe are acting in an anti-competitive nature, so this was a daunting potential minefield for many of us, to say the least.

While I had a couple of self-represented buyers inquire about a listing or come through an open house that I was hosting this past spring, none of those interactions amounted to much.  If we’re being honest, I believe that many nosey-neighbours or buyers that are early in their search process used the “self-represented party” line as a defense mechanism, protecting themselves both in person and from subsequent e-harassment from pushy agents that have no tact.  If we’re being even more honest, I don’t blame them, as we’ve talked many times about the dearth of quality agents in this industry, and I’m sure we’ll touch on that again.

Nonetheless, in May of this year, I found myself in a position to wade deep into these uncertain waters.

A client of mine referred me to a friend of his who was looking, along with his partner, to purchase their first property.  As luck would have it, the very first time we went out to look at houses, we found one that was an ideal fit.  And wouldn’t you know it: this was being sold by a self-represented seller.

These buyers were looking for a home outside the city proper, in a 905-town located west of Toronto.  I’m curious to see, over the next twelve months and beyond, if a disproportionate amount of these self-represented sellers are located in less sophisticated markets outside of the 416, or if this is something that will ultimately gain a geographic balance.

In any event, I prepared to show the property and as I often do, I had a quick chat with David and Tara about the prospect of the showing.  We all agreed that since this was the first time out with these buyers-clients, the chances of them liking this property and being confident in their interest enough to consider an offer were quite slim.

We figured that this might represent an opportunity to discuss how to handle these conversations with self-represented sellers in the future, but that the journey out west and the showing itself would amount to nothing more.  After all, this property had been on the market since September of 2023, so there must have been something wrong with it that wasn’t clear in the photos, right? Not only that, the home wasn’t priced too far from the reasonable comparables.

Alas, if that were the case, then this wouldn’t be a very good story.

My clients loved the property and wanted to move forward with an offer.

So, I explained that the sellers were self-represented (something my clients could have potentially deduced based on the showing we had just completed, but more on that in a moment), the potential implications or pitfalls of this process, and then prepared and presented an offer.

That’s where things got very interesting.

Let’s start with the showing itself.

Booking a showing with a conventional brokerage is very easy.  Around the time I got into the industry, a new company called BrokerBay became the booking system of choice for nearly every brokerage.  As you can imagine, a “for-sale-by-owner” property doesn’t have access to said programs.

After making five phone calls to two different numbers over two days (one of which turned out to be a typo), we finally managed to get the seller himself on the phone, who was nice enough but who had all kinds of restrictions on showing times (I suspect because he didn’t have an agent to remind him that unfettered access is crucial for selling any home).

Eventually, we were able to find a convenient time for both buyer and seller, and off we went.

The viewing of the house was unique too.

Our first impression was a handmade “FOR SALE” sign on the front lawn, with the seller’s name as the point of contact, and a generic and obviously newly created ThisCityHouseForSale@gmail.com email on the bottom of it.

As for the condition of the house, I think it’s safe to say that we did not expect this to be staged like a typical TRG listing.  Having said that, how often do you see a pair of used underwear on the floor of a bedroom during a showing?  Well, the answer is: not usually, but on this day, everything was unusual, and each room greeted us with a different reason to say “Wow!”

But while the house itself did not present exceptionally well, I was able to look past the mess and note that the house was structurally and mechanically sound, with many recent improvements.

The challenge then became that the owner himself wanted to communicate that, rather than letting the house speak for itself, let alone me, in my capacity as my buyers’ advocate.  He was not only present during the showing but insisted on following us around and providing unsolicited commentary.

As you can imagine, this was not doing him any favours. Buying a house is a very personal endeavour and privacy for the buyers is paramount, especially from the other party in the prospective transaction.

Any seasoned agent will insist that the sellers vacate well before and return generously after any scheduled showing. I was beginning to understand why this property had been listed for so long.

Nonetheless, we saw a few other properties that day, and my buyers were clear in their intent.  They wanted to present an offer on this house.

We drafted the (what I can objectively say was a very fair) offer, gave a very generous irrevocable as per their request (in order to have a lawyer review the offer in lieu of a Realtor), and then we waited.

And waited.

Over sixteen hours passed before we heard back, and ultimately, I had to follow up with the seller to get a response.

That response – it was confusing, it was icy, it was an advanced copy of “How Not to Transact In Real Estate.”

Negotiating real estate transactions during the best of times can present difficult challenges, and when a high level of emotion is involved, the discussions and interactions can become intense.

Ask my seasoned colleagues David Fleming, Richard McNutt, and Christan Bosley, and they’ll all tell you that every time they’ve sold their own family homes, they’ve “listed” with a colleague at Bosley to get themselves one step back from the front line.

In this case, the true owner of the home turned out to be the wife of the gentleman I met during the showings, and she wanted to be her own judge and jury.

The conversation started with her immediately telling me they had three other offers, which I thought was nearly impossible, given they’d been on the market for six months without selling. Unfortunately, because they weren’t being governed by RECO and weren’t using the BrokerBay appointment and offer tracking system, there was no way for me to verify the authenticity of these three offers.

As the negotiation process unraveled, she began personally attacking me as a Realtor as well as ranting about the industry as a whole, questioning my motives and expertise, which I wasn’t particularly bothered by, as we hear this often.

But it’s certainly a unique way to introduce yourself to your “partner” on the other side of the table, with whom you need to work in order to find a deal that works for both parties.  I began to suspect that other agents who had previously approached her had similar experiences, and I wonder how many of those agents the seller had chased away.

The discussion took an unexpected turn when, amidst the tension and angst, she broke down emotionally and shared personal details of a serious family issue.

She used that as a way of explaining that she wanted to, somehow or other, include an “escape clause,” built into the Agreement of Purchase & Sale, so they could circumvent a legally binding contract in order to instead give the property to their daughter.

This emotional vulnerability in conjunction with the entirely non-negotiable and also technically incorrect use of an escape clause complicated the negotiation further, as her erratic behavior shifted from aggressive to distraught, making it challenging to maintain a professional and productive dialogue.

Ultimately, I encouraged her to spend some time prioritizing what was most important and to give us a call back after the weekend so that we could revisit the offer when she was in a better position to negotiate with a clear mind.

However, after relaying all of this to my clients, they became quite concerned about how this process could look, between an accepted offer and a scheduled closing, and the associated risks therein.  They decided that they wanted to explore what other options were presented in the coming weeks, and we backed away from this self-represented seller and her home.

Over the next two months, we looked at just about every suitable property that came onto the market in their target areas and remained exceptionally diligent in our search.  But because of the list price, the condition of a home, or the features therein (or lack thereof), none of the homes we saw felt quite right.

By the middle of July, my buyer clients asked if the “FSBO” home was still listed, and of course, it was. Sure enough, they decided to revisit the prospect of the home, working with the uncertain seller, and potentially putting an offer back on paper.

Another issue that was presented at the onset with the self-represented seller was that she refused to pay a cooperating brokerage commission.  While we can debate the effectiveness of offering 2.5%, or 2%, or a flat fee of $500 another time, the point is that she had driven away countless buyer agents who didn’t know how to work in this situation, either to negotiate a commission directly with a seller, or to find a suitable alternative.

My buyer clients and I devised a plan: we would present an offer very similar to the one we had submitted two months prior, but at a reduced price to account for an additional sixty days of the property sitting on the market.

Then we would remove any commission payable by the seller, and my clients would directly compensate me instead.

When the seller received our offer at a much lower price, she initially balked. But upon seeing the removal of the commission payable, she decided that this somehow worked in her favour.

Even though the net price was substantially less than what we had provided two months prior, she was so gung-ho about not paying a cooperating agent that she was blinded to the fact that this offer was quite inferior.

This strategy proved fruitful, and we ultimately landed on a sale that was conditional upon a satisfactory home inspection.

But we weren’t out of the woods quite yet.

As you can imagine, the home inspection was interesting, with the extremely home-proud seller present at the property once again and following the inspector and my clients to each room to explain everything in minute detail.  It got so prohibitive that the home inspector, who I’ve seen navigate countless situations with grace and class before, had to ask the seller to step away, to “give us a little space”.

Similarly, the deposit provided another unique challenge.

The deposit is typically held in the listing brokerage’s trust account, and it’s only released upon the successful completion of a transaction (or a court order, or mutual release).

The listing brokerage cannot release these funds under any circumstances.

In this case, the seller demanded that the deposit be made payable to her personally, and that she be entrusted with keeping the funds “safe” until closing.

This was obviously never going to happen, so after suggesting that the funds be held in our brokerage’s trust account – which the seller shot down, we agreed that the funds would be held in the buyer’s lawyer’s trust account.

“All’s well that ends well,” or so the idiom goes.

It’s now the fall of 2024 and my clients are happily moved into their new home and are thrilled to have purchased the house that always felt like the best fit from the very beginning, and to have paid less than fair market value too.

The sellers must be pleased as well to have sold their home after eleven months on the market.  I don’t think you need me to tell you that this is a relative eternity in the context of the past-paced GTA real estate market.

It begs the question though: did the sellers make out well in the end?

Did their decision to “self-represent” benefit them, when all was said and done?

Ultimately, we can’t go back and re-list and re-sell this home, so we’ll never truly know.

I have my opinions, of course, and exploring comparable sales suggests now, as it did then, that my clients got an absolute steal. I also wonder what the emotional and financial costs were to the seller for carrying this home unnecessarily over eleven months.

My buyer client said it best:

“These sellers just wanted to sit down at a Tim Horton’s with a buyer and negotiate the terms on the back of one of those brown napkins.”

That works for finalizing a deal for a lightly used Miele toaster through Facebook Marketplace, but is this the right path when you’re selling your largest asset and investment?  I’m all ears.

The conclusion that I drew from this experience was simple: the real estate industry is undergoing a big change, and I for one welcome it.

Personally, I would welcome the opportunity to negotiate with a homeowner directly, again and again.

Why that homeowner would eliminate their first line of defense and choose to lock horns with an industry professional when they have zero experience and knowledge themselves, I don’t know.

But I’m the guy who has his investments with a wealth manager because I know that’s not my area of expertise, whereas some people prefer to throw darts at a board in their Wealth Simple account.

To each, their own.

But when my car breaks down on the side of 401, I’m not going to choose that as the first time to learn how to use a car-jack and change a tire, so you’ll never convince me that an experienced, reputable, professional buyer agent doesn’t provide more value than the relative compensation offered by a seller, and agents like myself are out there every day, pounding the pavement, to get the absolute best for our clients.

Only time will tell whether the respective buyer and seller pools agree but based on the volume of clients we’re working with this fall, I’d say that “Tim Horton’s brown paper napkin” isn’t going to replace the standard Agreement of Purchase & Sale any time soon.