An Open Conversation With A First-Time Buyer

Stories! | September 18, 2019

first-time buyer

I sell a fair amount of real estate.

Houses, condos.  Buyers, sellers.  Low-end, high-end.

It’s my job, and it’s routine.

I often take it for granted.

And when you take it for granted, you might skip a step, miss a beat, or gloss over a detail.

If there’s one thing I’ve learned about myself and about my business over the last year, it’s that I often fail to realize that the market participants in our ever-crazy Toronto real estate market are just not on the same level as those of us that live and breathe real estate.

And how could they be?

I sold two condos on Tuesday – one to a very experienced investor, who didn’t need to see the unit, or include a condition in her offer, and another on behalf of a first-time seller.  But if I take the same approach with both clients, then I’m making a dire mistake.

There is no one-size-fits-all approach in this business, since every buyer or seller is different.

The first client made an offer on a condo, sight-unseen, because she knew the value and that the unit was under-priced, owns in the building, and knows the Agreement of Purchase & Sale inside out.  This process was expedient, but not cavalier.

The second client sold his condo, having obtained four offers, and having just completed the deal, I feel as though I could have explained the Agreement of Purchase & Sale in greater detail.

Price, deposit, closing, chattels/fixtures included, clauses, conditions.  That’s about it, right?

In my mind, yes.  But in his mind?  Perhaps there’s more.

I say all this, not because I’m really tired, and run-down, and in a state of self-reflection, but rather because I have come to realize in the past two weeks that being a buyer in the current Toronto real estate market is harder than I ever thought possible.

And it’s at the point where I feel bad for first-time buyers.  I really do.

I had a phone call on the weekend with a first-time buyer that I’ve been chewing on for a couple of days now, and it’s affected me the point where, as noted above, I’m starting to see that not everybody has the same level of experience in our market.

I had a listing for a freehold home, priced at $899,900, that was an absolute gong-show.

Over 60 showings with agents, close to one-hundred people through the open house on Saturday & Sunday, multiple sign calls and MLS inquiries, and just a downright barn burner all around.

On Sunday afternoon, my phone rang, and the voice at the other end of the line was so full of energy and excitement.

“Hi there,” she said, “I’d like to ask you a few questions about XX Smith Street.”

“Sure,” I said, somewhat unsure as to who I was speaking with.  I mean, in our business, an agent should say his or her name when he or she answers the phone, and should do the same when calling another agent.  Again, not everybody has the same level of experience and know-how, but suffice it to say, you learn a lot about an agent when he answers, “Hulloh?” rather than, “James Smith!”

The voice on the other end of the line said, “Great, so I visited the property yesterday, and I have a bunch of questions…”

I asked, “Sorry, who am I speaking with?” assuming that perhaps it was, in fact, a young agent who forgot to introduce herself, but she continued “Oh, sorry, my name is Nicole, and I’m a young, first-time home-buyer, trying to get into this market.”

I should have stopped for a moment of reflection right there.

I’ve never been to an Alcoholics Anonymous meeting, but from what I’ve seen in cliché scenes in movies and on TV is that powerful moment when a person says, “My name is David, and I’m an alcoholic,” and the rest of the room claps.  It’s that moment of self-identification that’s so brave, and so empowering to those that accept it.

For any “young, first-time home-buyer” in Toronto, just knowing who you are, and understanding the battle that lays ahead is an important first step.  And as you’ll see from the rest of the conversation, there’s a lot to learn.

I told Nicole, “Alright, I’m all ears, let’s have it,” and she certainly threw me for a loop.

“Well, as I said, I’m a first-time buyer, and I have a pre-approval for $835,000.  So I’m wondering if you think the sellers of this house are negotiable enough to work with me on my budget?  And if so, would you be able to assist me with the necessary next steps?”

Right there, in that moment, I felt awful.

I hadn’t met Nicole, but I could feel the excitement in her voice.  I didn’t want to be the person to take that away from her, but I also didn’t want somebody else to do it, and break her heart.

I paused, and then said, “Nicole?  Can I be honest with you?”

She said, “Of course!”

She didn’t know where this was headed, so I explained a little.

“Nicole, we haven’t met, and you really just cold called me…”

“Yes, I did,” she said.  “I was at the open house with my Dad yesterday, and I took your business card, made some notes, and wanted to follow up with you right away!”

God, she was so chipper.  So eager!  I’m so old.  And so…..realistic.

“Right, well,” I continued, “What I meant, Nicole, is that we haven’t met, and you don’t know anything about me, but I fashion myself a very honest guy.  A brutally honest guy, and if you were familiar with my work on the Toronto Realty Blog, you’d know that I’m opinionated and I like to share those opinions, even if the truth often hurts.”

“That’s great,” she said.  “That’s what I need, that’s really what I’m looking for.”

“So here’s the thing, Nicole,” I continued.  “You’ve picked this property that’s listed at $899,900, and have asked me if the sellers are negotiable on the price, when in fact, this property is under-priced, you see?  This property is likely going to get four, five, or ten offers, and sell for a million dollars.”

There was no response.

“Do you have an agent working on your behalf, Nicole?” I asked her.

“No, I don’t,” she said, “But if I were to make this offer, I would like to make the offer through you,” she said.

So now even though I wasn’t finished my first point, I knew there was a second point I wanted to make.

“Nicole, let me finish that thought.  The way properties are listed for sale in Toronto, for the most part, is that they are listed on a certain date, and offers are held back for a week.  At that time, the seller will entertain offers, and typically if a property is under-priced, then multiple offers will result, and the property will sell for over the asking price.”

“Yes, I’ve heard that,” said Nicole.

“So in this case, you’ve picked this property that everybody in the city is looking at because of the price and the location, and you’ve got a budget that just isn’t anywhere close to being able to afford it,” I told her.

And in telling her this, I realized the trap that the big, bad Realtor wolf set for the unsuspecting, first-time-buyer sheep.

“You need to look at the listings and see if there’s an offer date,” I told her.  “And if you had an agent working for you, the agent would let you know if and when there’s an offer date.”

“I don’t want an agent,” Nicole told me.  “I want to make an offer through the listing agent,” she told me.  And that was, yet again, coming back to the second point I wanted to make with her, but I hadn’t yet finished my first.

“Not a lot of $899,900 listings sell for $835,000,” I told her.  “Maybe here or there, and maybe outside the core.  But if you’ve got a budget of $835,000, you need to be looking at houses that are actually going to sell for this price,” I explained.

“Well that’s why I was hoping you could help me with this offer,” she said.  “If I make the offer through you, then you get double the commission, so it’s worth your while to help the two parties come to an agreement,” she finished.

I wondered where she was getting her advice, so I asked her.  She said, “My Dad tells me that agents are out there to make deals, and that I should find an agent who will work with me on the buy side, who is already listing for the seller.”

I know these Dads.  I see a lot of them.

I love that this guy is looking out for his daughter, and I don’t blame him for not trusting agents, and for telling her to use them as she sees fit.  But we all know this approach is misguided, and I told Nicole exactly that.

“Nicole, I do not represent buyer and seller in the same transaction.  Ever.  I wouldn’t do this under any circumstances.”

“But you get double the commission,” she told me.

“I’m flattered that you’re looking out for my financial well-being,” I mused, “But I’ve been offered far more, to do far less, and still haven’t taken up the offer,” I told her.  “There are agents out there that will do what you’re asking, but they’re not representing properties like this.  They’re probably listing dumps, and they’re probably going to screw their seller a little less than they’re going to screw you.”

It was at that point that I could finally sense disappointment in her voice.  It was as though everything she had been told, was untrue, and she was coming to the realization that she would not be moving into this house in the fall, having her girlfriends over for drinks, and walking to work.

“Okay, so, what do you recommend I do,” she asked innocently, and sincerely.

“I would recommend you find a real estate agent to help you through the process,” I said.

And I don’t want to turn this into an advertisement for why to hire a Realtor, but if ever there was a candidate for assistance, it would be Nicole.

“Ask your friends, your family, search on Google; do whatever you need to do, but find somebody you can trust, who is experienced, and who can explain this process to you.”

“But what about my offer?” she asked, with her voice truly demonstrating her young age.  “I still wanna make my offer.”

“Nicole, I had a listing last week on Palmerston Avenue, and we got nine offers.  The list price was $1.3M, we sold for $1.55M, and we had an offer for $1.25M that was conditional.  This offer never should have been drafted, but it was.  And it was a waste of time.  It was a waste of the buyer’s time, and a waste of the agent’s time, and I blame the agent for not telling the buyer that he or she had less than a zero percent chance.”

Nicole was quiet, and I wasn’t sure if she was following along.

“You want to offer $65,000 under list for a property that’s going to sell at least $100,000 over list, and next, you’ll tell me that you also want a condition?”

Nicole actually perked up and said, “Yes, but, I would only need three business days for financing instead of the usual five.”

Well, at least she knew that financing conditions are typically five days.

But she had reverted back to that excitable, naive, wishful buyer that was completely misplaced in this market.

And that’s when I did something that made me feel older than I have ever felt in my life, but also made me realize that I feel for these young, first-time buyers: I called her “kiddo.”

“This isn’t going to be the one.  Live to fight another day, kiddo,” I said.

She thanked me, and that was the end of our conversation.


Who am I?

When did this happen?

I swear, she sounded like she was 19-years-old.  Probably wasn’t much older, in all honest.  Maybe 23?  24?  She went to an open house with her dad?

Having just written the preceding, and seeing the words up on the screen, I feel even stronger than I did before about just how unfair our market is.

It’s expensive, and impossible.

But the process is so complicated, and it’s tough for any first-timer to figure out.

Yes, agents are partly to blame for the “offer nights,” and under-pricing, but that’s necessitated by the market, unless you really do want to sell for less money, so save me the sanctimony.

Having just received an email from a client who is looking to buy in the Netherlands, I can tell you that the Toronto market is a dream compared to over there.

And talk to your friends in London, England about “gazumping,” and how hard it is to actually close on a home that you’ve purchased.

But take this young buyer, Nicole.  She’s trying to do the work on her own, she’s pounding the proverbial pavement, she’s getting advice from her dad, and she’s completely lost.

She’s lost on price, she’s lost on process, she’s lost on protocol, and she’s still being guided by hope and wishful thinking.

I hate crapping on people’s dreams, but I’m a realist.

I would like to think I was helpful, and perhaps if I had it to do over, I might have warned her about scumbag agents, but how would that sound coming from another agent?  Is there any credibility on my part?

It’s not my job to coach and educate the buyer pool, but my God, do I ever feel for these young buyers.  I just can’t help myself.  Maybe because I have a daughter.  Maybe because I spent seven years coaching teenagers.  Or maybe because the market was never this tough when I was their age, and I can’t help but feel a bit guilty – and fortunate.

I’d love to finish this post with something upbeat, or a solution.  But I don’t have one.

I mean, does anybody?

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  1. Pingback: An Open Conversation With A First-Time Buyer | Real Estate News Group
  2. Appraiser

    at 8:40 am

    “I would recommend you find a real estate agent to help you through the process,” I said.”
    ~David Fleming

    Forgive me David, but I am puzzled as to why you, or someone on your team, would not offer to work with Nicole to advise her and perhaps find her a property in her price range?

    Or was that an offer?

    1. Not Harold

      at 9:22 am

      From “Nicole’s” comments I wouldn’t want to work with her. Inexperienced and full of advice fit for other market conditions and different locations. Which would be a nightmare to deal with, unlikely to lead to an actual deal, and definitely not an effective use of David or his team’s time.

      Telling her to research agents, get other recommendations, and find someone that fits is just professional and ethical. If she comes back after figuring out who David is then it could be a good working relationship.

      Lots of agents will grab any and every client but to be effective you want to choose your clients so that everyone has a great experience. Some people want to be driven around in a Rolls, some people need an agent that speaks Fukien, some want one to sell them precon condos.

      By the way nice to see you support a woman groping criminal who helps people who buy prostitutes for a dictator’s son rather than protect the rule of law.

      1. Appraiser

        at 11:57 am

        @ Not Harold

        You must be confused. The woman-groping criminal you are referring to runs the place just south of us.

    2. David Fleming

      at 11:34 am

      @ Appraiser

      Here’s my answer, and this risks coming off as cheezy…

      My objective was to get Nicole to listen to what I was saying, absorb it, and accept it. If I had followed up this speech with, “…..and you should work with me as your buyer agent,” then this undermines the advice I just gave her.

      I don’t need to chase every buyer or seller in the city. I’m busy, my team is busy, and we’re happy to work with anybody who expresses interest.

      But in this case, with a buyer who is so far out to lunch, whom I’m trying to help, I felt the best way to get her to heed my advice was to not come off as pushy, or self-promotional.

      1. Appraiser

        at 12:34 pm

        Ok, maybe a little cheezy, I’ll give you that.

        p.s. Bravo! on the not chasing every “suspect” down.

      2. Professional Shanker

        at 1:18 pm

        Very respectable, kudos.

        Kiddo….Given she is approved for $835k, she would have to be at least 27 to have the income to support that, or family money is in play.

        1. Appraiser

          at 3:02 pm

          How do you conjure such definitive conclusions from so little information?



          Secret incantation?

          1. Professional Shanker

            at 5:01 pm

            a mix of generalization and understanding mortgage lending.

  3. Max

    at 8:59 am

    It really is a tough market to buy in, and even if she finds an agent, there’s no guarantee he or she will properly guide her in the buying process. Maybe lead her into the relisted-underlisted-sat-stale-for-months property. Finding a truly genuine and professional agent is like getting a good teacher.

  4. Kyle

    at 9:29 am

    On coaching and educating the buyer pool. I think having reliable information is key, however there’s an overabundance of advice and opinions out there and not all of it is solid.

    David hit the nail on he head, when he described those who live and breath the market as being informed. Active participants are going to be have the most relevant insight and knowledge. Personally, i would put zero (or in many cases even negative) weight on advice or opinions from anyone who hasn’t ever actually transacted in that particular market, despite these people often being the loudest and most willing to share their advice and opinions. Talk to people who are making offers, who have made offers (both winning and losing), who have recently bought or have been hunting for a while. Ask them about the good, the bad and the ugly. Ignore armchair internet experts or anyone else, who can only speak from second or third hand experience.

    For learning about Toronto’s market, there are plenty of good resources out there. This Blog is definitely one of them. I have bought and sold a lot of properties but i still learn new things from reading TRB and some of the more informed comment. Housesigma is invaluable and i think it also makes sense to learn as much as possible about the different neighbourhoods, schools, architecture and housing types to get a sense of what it is that drive values.

    And definitely work with a good Agent, whom you trust and who spends the time to help you understand the market and the process.

  5. Bitter Beet

    at 9:49 am

    Back in July 2017 my partner and I were potential first-time buyers with good income and credit, approved for $999,999. What a disaster. We had a realtor and the search was still the most confusing and discouraging process. Do you want a 1.5 hour commute each way? Or a crumbling dump? Or a shoebox condo that sold for 400,000 3 years ago? And being baited with houses priced at 699,000 or 799,000 and selling for over a million. Then our landlord gave us notice she was taking her condo back and we had to move out in 60 days, so we gave up. Even as late 20s professionals with a combined income of over 200,000 it is still a struggle to live in Toronto. And many are not so fortunate.

    It sounds like things have only gotten worse too. Nicole does seem shockingly naive, but I understand her plight and I wish there was a solution.

    1. Professional Shanker

      at 1:25 pm

      If you are renting a place with over $200k in income, your struggle sounds like most people’s dream. After tax you have $140k of which $25k could be allocated to rent, leaving you $115k to live and do whatever you would like.

        1. Professional Shanker

          at 5:04 pm

          2017 rental rates of a 1 bed were ~$2k, fast forward to 2019, 2.5k/month. A quick look on mls would confirm that.

          1. Kyle

            at 7:04 pm

            Exactly, $2.5K/ month = $30K per year + utilities. Which is a lot more than the $25K you suggested. Not to mention that is a simple generic one bedroom, hardly “most people’s dream”

          2. Professional Shanker

            at 7:10 pm

            What percent of renters are paying 2019 market rates……?

          3. Kyle

            at 7:27 pm

            Your math still makes no sense whatsoever. Seriously where do you concoct your “facts” from?

            If she was pre-approved in July and spent a few months searching and then had to find a new apartment 60 days later, that puts her in early 2018. 1 bedroom rents across the city (this includes crappy areas and non-condos which brings down the average, but i’ll even give you that benefit) were still 2200/month.

            “In May of 2018, the average rent for such a unit was around $2,200.”

            So that’s still 26.4K/yr + utilities which is still much more than $25K, and which is still far far from “most people’s dream”

          4. Max

            at 7:55 pm

            The difference between 25k and 26.4k+utilities in the context of 140k is pretty insubstantial. Don’t cry over a few 1000.

          5. Kyle

            at 8:28 pm

            The point isn’t the few thousand dollars difference. The point is that the rent numbers he’s throwing around won’t even get you into the second most humble type of apartment (the only thing humbler being a bachelor). For someone who was planning on buying a house that kind of living accomodation is hardly living the dream.

        1. Professional Shanker

          at 11:43 pm

          I have taken too much tax off if anything, a person in that income bracket can max their rrsp contribution, probably closer to 79k net based on 100k employment income.

          1. Jimbo

            at 2:26 am

            It is my belief that if they maxed out their RRSP their tax due including payroll but not including group insurance plan etc would leave them with $76k after tax. Now they would have to put $18k in the bank to reap that tax break and would be left with $58k in disposable income. So between the two if they made $100k each they would have $116k to live off of not $140k. Less than $10k a month.

      1. Bitter Beet

        at 8:57 am

        Actually renting was a dream! Well until we abruptly had to find a new place. You never know when your landlord will decide to “move in” and you’ll be thrust back into the ever-tightening rental market!

        The article was about first-time buyers so my point was that even with high incomes it’s not easy to be a first-time buyer in Toronto. Do you know how much the mortgage is on a $900k house? We decided to keep saving but our rent went up and there’s the possibility that the market will outpace you. We ended up leaving Toronto recently but that’s another story.

        1. Professional Shanker

          at 9:55 am

          This comes back to the age old argument on this blog, GTA homes are so expensive that even high income individuals like yourself question whether it makes financial sense to purchase. Combine that with a complex purchasing process and it is overwhelming as David illustrates constantly.

          If you are able to secure decent salaries and a better standard of living outside of Toronto, congrats!

    2. Max

      at 7:53 pm

      You should be able to accumulate significant savings and afford a good house. Maybe you’re looking for a house most people can’t even afford. Nothing to complain about there.

      1. Bitter Beet

        at 8:37 am

        Not complaining, just stating that it was confusing and difficult even in our extremely fortunate situation. The average household income in Toronto is ~95k…

        But yes you are right, we worked hard on our careers and we hoped for a semi or a townhome with a <45min commute. Which *is* more than most people could ask for. No sarcasm, but it is kind of sad. It was definitely a learning experience for me.

        1. Max

          at 8:33 pm

          Good luck with your search. It might be a good idea to take a smaller step first and have a home nobody can push you out of, or accumulate a bigger downpayment with your incomes, which shouldn’t take too long. Not sure if you have kids, but I do and it makes renting difficult and stressful..

  6. J

    at 10:06 am

    “a very experienced investor, who didn’t need to see the unit”

    No need to see the cash flow statement either.

  7. J

    at 10:29 am

    I don’t know Nicole, but some perspective may be getting lost in all this. Instead of focusing on education about the intricacies and peculiarities of the Toronto real estate market, maybe she should first take a step back and reflect on her rationale for entering the housing market.

    She is likely single having gone to the open house with her dad. If she doesn’t stay this way forever, purchasing a home right now could greatly complicate things in the future.

    As a first-time home buyer, she has one of the biggest, yet often overlooked, advantages. Without an existing home to sell, the home buying experience is much less stressful. She can take her time, breathe, and wait for the right opportunity (both in terms of personal circumstances and the market). It could be unfortunate to squander this opportunity, paying exorbitant transactional costs in the process, just for the sake of a “starter home” right now.

    My advice to Nicole would probably be a bit different.

  8. Jenn

    at 10:43 am

    David since you’re in a sharing mood, may I ask what price you paid for your first condo and what year that was? It’ll add some great context to this discussion.

    1. David Fleming

      at 1:14 pm

      @ Jenn

      I paid $277,500 for my first condo in early 2006.

      With 20% down, my 5.19%, 5-year-fixed rate mortgage carried for $1,315.28.

      That same amount today, at a 2.49% rate, would compare with a $367,500 purchase price. So that’s to say: despite lower rates, the affordability is way, WAY worse for first-time buyers. More of what we already knew.

  9. Derek

    at 4:15 pm

    If you’re the first agent she has spoken to, then she heard what she needed to hear. I don’t think it’s necessary to feel sorry for her. If that was the first kick at the can for her, she’s ahead of the game. She can now avoid being the lowest offer for 10 failed attempts.

    1. Jennifer

      at 1:06 pm

      im not sure shes as naive as everyone is thinking. She tried to get the property using one way that has worked (i.e., double ending). Maybe doesn’t happen so much now because of so much press on the issue but it was one way to do it, and maybe still is with the “right” agent.
      She actually sounds like she is in line with most of the public’s views on agents. And she sounds more in tune as compared to other first time buyers (do many know it is 5 days for financing). Maybe if offer dates were shown to the public she wouldve known about the listing price strategy, and that this wasn’t a house with offers anytime that could be worked with.
      She may have had pipe dreams, but I cant fault her for trying – what did it cost her a phone call?

      1. Batalha

        at 2:33 pm

        Plus there are surprisingly few websites like TRB (in Canada, anyway) which provide extensive “nuts-and-bolts” information on how the RE market works (in Toronto, at this point in time, admittedly) but with insight that often transcends the present situation. There are a few sites that sometimes offer a certain degree of useful information (Better Dwelling, Move Smartly, Toronto Storeys, Urbaneer, etc.) but for the most part, seeking out legitimate, actionable information on the realities of the real estate market is much harder than it should be. And I’m not sure why this is.

  10. Peggy

    at 12:01 am

    We bought our first house in 1993. I remember looking at my husband and hoping that he was paying attention, as I was pretty overwhelmed by the process. That was a much better time to be buying and I can’t imagine what it would be like now. I hope that this first time buyer gets connected with a good agent.

  11. Pingback: We Bought A House! (Part 3) - Toronto Realty Blog
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