Imagine having to sell to a salesperson.  It’s not an easy task.

With some pre-construction projects, the on-site sales people and marketing team need to lure in Realtors in order to get those Realtors to sell or recommend the project to their clients.

Perks are part of the business, but normally they go to the buyer…..not the agent…

Have you ever noticed how magicians never tell their secrets?  We all know that “magic” is really just a synonym for “illusion,” but professional magicians refuse to divulge just how they managed to move the Statue of Liberty or swallow those swords.  When a magician does reveal his secrets, he is shunned by his colleagues forever.

I can’t help but wonder if I’m also treading close to the edge with what I’m about to divulge…

It’s no secret, or at least it shouldn’t be, that a Realtor usually generates a commission of 2.5% of a successful sale when he provides the buyer to a transaction.  Sometimes it’s only 2.25% or 2.0%, and sometimes a “bonus” is offered in the form of a 3.0% commission—perhaps if a property has been sitting on the market for a while or if the seller needed to move by a certain date.

With pre-construction developments, the commissions are generally larger.

This is one reason why I personally love investing in pre-construction myself; If I buy a $300,000 pre-construction condo and I earn a 3.5% commission, I’m effectively paying $289,500 and getting in below the ground floor!

I would say that with pre-construction the averagecommission is about 3.5%.  But recently a project, which shall remain nameless, was having trouble selling and before they went under, they took one last kick at the can and offered a whopping 6.0% commission to cooperating Realtors.  That is two-and-a-half times what we would generally recieve for the sale of a typical resale house.

Pre-construction projects usually have a “Launch Party” where they do most of their selling.  They’ll pick a weeknight and call it the “Grand Opening,” and offer sales perks to both buyers and their agents.

Picture a flashy laser-light show and a man with a terrific voice (like the guy who does all the movie previews) wooing you into buying a condominium for investment or residence.  There is food spread out on a multitude of different tables, and maybe free booze depending on the project and how pricey it is.

The best deals usually are found at the “Grand Opening” since they need to sell most of their units up front not only to be able to advertise “sixty-percent sold out after one day” but also to appease the investors and financiers.  Typically, you’ll see a worksheet with a breakdown of the Regular Price versus the Special Grand Opening Price.  If a 1-bedroom us “regularly” selling for $329,900, it might be dropped to $318,880 for the grand opening.

The commissions to Realtors are usually higher on the night of the grand opening as well, but not always.  We might receive half-percent more on a successful sale.

But just when I thought I’d seen all the “perks” you could possibly offer, I came across the flyer for Aura at College Park.

This is phase-three of Residences of College Park and started selling in March, 2008.

Here is their “Prize List” depending on how many sales a Realtor makes at Aura at College Park:

10 Sales, Firm & Binding:

Samsung 46″ LCD TV & Blu Ray Home Theatre System

25-49 Sales, Firm & Binding (10 sales must be from floors 56-71):

$10,000 Pre-Paid Debit Card

50-99 Sales, Firm & Binding (23 sales must be from floors 56-71 and 2 sales must be on the penthouse floors)

2008 Mercedes Benz C300 4Matic Sedan

OR

2008 Jaguar XF V8

100+ Sales, Firm & Binding (45 sales must be from floors 56-71 and 5 sales must be on the penthouse floors)

Doesn’t James Bonddrive an Aston Martin?  Because I think 100+ sales in one building is just about as realistic as when James Bond jumps out of an airplane from 30,000 feet and lands on the wing of yet another airplane to eventually find safety and tranquility in the arms of a gorgeous woman…

What I find most amusing is the qualifiers: “45 sales must be from floors 56-71.”  So what if you sold 105 units in the building but only 44 were from floors 56-71—would they refuse to give you the car?  It wouldn’t surprise me in the slightest.

I have sold pre-construction before, and even sold to multiple clients in the same project, but I can’t foresee anybody selling this many units in the same building.  This leads me to believe that the only way to do this is to indirectly work for the developer.  What I mean is this: if you are a Realtor evaluating dozens and dozens of new construction projects in the GTA, you’d have to basically throw all those out the window except ONE, and ONLY sell that project to your clients.

It seems like a serious conflict of interest to me.

And if you see your Realtor driving a 2008 Aston Martin in a couple months, perhaps you should wonder if he really chose the best project for you.

All jokes aside, I think the promotion is a rather bold move on the part of the developer.  It’s not going to kill them to give a few 46-inch Samsung’s out if Realtors make ten sales, and the chances of them having to part ways with a luxury car are not all that great.

You might ask yourself, “Who the heck is going around buying ten condos, let alone one hundred?”  But the reality is that international money flows into our Toronto real estate market more than you could ever imagine.  With the United States on its knees, investors have been parking their money in Canada for years now.  It’s not uncommon for, say, a Hong Kong billionaire to park $10M in “Toronto Real Estate,” without knowing what it is or how it’s diversified (an agent would usually buy 20 units in the same building for simplicity, and for reasons of utter laziness rather than diversify).

I really thought I had it made in the shade when I got my last 3.5% commission, but now I’m looking out in the parking lot at my Toyota and thinking I could definitely stand to upgrade.

Only one question remains: Anybody in the market for 75 condos??