Why does it seem like the media is always 2-3 years behind reality?

They’ve been predicting the doom and gloom of Toronto’s real estate market for seven straight years now (or as I like to say – “They’ve accurately predicted eight of the last two recessions…), and now they’re finally on board with “Bully Offers” just as the ship is sailing off into the night.

Here’s an article from the front page of last Friday’s Globe where they clearly demonstrate that they’re out of touch…

“Bully Offers Losing Their Bite”
The Globe And Mail
By: Carol Ireland

It doesn’t take much to provoke a bully in Toronto’s spring housing market.

Houses for sale are scarce and potential buyers are in a combative mood.

“Buyers are more aggressive,” says agent Rochelle DeClute of ReMax Hallmark Realty Ltd., who scrambled on a recent Sunday night to bring four potential buyers to the negotiating table.

Ms. DeClute had spent the afternoon greeting potential buyers at the open house in the upper Beaches neighbourhood. The sellers planned to review any offers at a set time later that week but one buyer pre-empted that plan with an offer that night – good for three hours only.

Ms. DeClute quickly contacted agents who had brought their clients to see the house and found three interested in making an offer. The so-called bully prevailed with a bid so far above the asking price that none of the other offers came close.

Ms. DeClute says bullies take a strong stance: “Maybe the sellers want to see offers on that date but I’m putting in my offer now and it’s good for a very short time,” she says in summing up the opening salvo.

In previous years, bullies often used the element of shock to their advantage because sellers and competing bidders were so disconcerted by the unexpected offer. Not only are such offers more common this spring, but people have become accustomed to them and they are more willing to join the fray, says Ms. DeClute. As a result, bullies are losing more often than they used to.

The Toronto Real Estate Board reports that listings in the Greater Toronto Area in March dropped 11 per cent from the same period in 2010. Sales slipped 11 per cent year-over-year. The average price, meanwhile, came in at $456,147 which is a 5 per cent jump from March 2010.

A blast of snow and colder-than-usual temperatures this March may have discouraged some sellers from listing sooner, agents say.

Meanwhile, tighter lending qualifications came into effect March 18th. As of that date, the federal government will no longer insure mortgages with amortization periods of longer than 30 years. Agents say the impending changes may have prompted some first-time buyers to move sooner in making a purchase, but the impact on the broader market was slight.

Real estate agent Geon van der Wyst helped one client to buy a junior one-bedroom condo unit near St. Lawrence Market just before the new rules came into effect.

“Typically they don’t have a lot to spend,” he says of the buyers affected by the new rules restricting how much they can borrow.

A bigger factor in Mr. van der Wyst’s view is the lack of inventory.

He was ready to whisk his client off to see a four-bedroom detached house in Moore Park late last month when the agent representing the seller called to cancel.

“I didn’t even get a chance to get a viewing in and there was a bully offer,” says Mr. van der Wyst of Royal LePage Real Estate Services Ltd.

The “bully” offered nearly $200,000 over the asking price of $1.295-million and therefore muscled all rival buyers out of the way before a contest could even get started.

Mr. van der Wyst says he would like to see more listings because buyers become frustrated when they have to compete in a frenzied market. He already has a couple of clients who say they will just sit back if a house attracts more than one offer.

“I hope the market does settle down a bit to a little bit of a balanced market because I think buyer fatigue could set in.”

Often the listing agent sets an artificially low price in order to draw attention but Mr. van der Wyst thinks more realistic prices would be better for the overall market.

Toronto-Dominion Bank senior economist Pascal Gauthier believes the real estate market nation-wide is settling into a comfortable zone after experiencing strong bouts of volatility over the past three years.

He expects sales to ease in most parts of the country as interest rates rise, but the activity should be strong enough to keep a floor under prices, Mr. Gauthier adds.

Asked whether the upcoming federal election will have an impact on the real estate market, most agents surveyed said no. Mr. van der Wyst was the exception.

“Yes,” he quipped. “It will make it harder to see our signs.”

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As I said – the media is always behind.

One of my very first blog posts about “Bully Offers” was in 2007 and now we’re sitting here four years later reading about it in the newspaper after they’re been rendered, at times, ineffective.

The article uses an example of a successful bully offer, but what they don’t use is all the examples of when sellers and listing agents shrug off bully attempts and say, “See you next Tuesday.”

In a typical situation, you might see a house listed at $699,000 on Wednesday evening when it comes onto the market, and decide you don’t want to wait until “offer night” next Tuesday, so you decide to bully at $751,000.

Now here’s the rub – the listing agent can always say, “My seller has decided not to look at your bully offer,” but we all know better.  Do you REALLY think that the agent receives the offer, calls his seller and informs he or she that there’s an offer, and doesn’t tell them the price?

I don’t think there’s an incentive anymore for sellers to look at bully offer attempts.

Why?

Because you know that buyer will be back next week.

Personally, I use bully offers to test the water.  I’ll offer $751,000 if my clients would be willing to pay more because if they did accept, we’d get the property for less than we were willing to pay, and as a bonus, we get some feedback about the sellers’ expectations of price for free.  Many listing agents can’t keep their mouths shut and instead of saying, “We’re not going to look at your offer,” they go on and on about how much the house is worth, how far off your offer was, what comparables have sold for, what they’ve been told they’ll get for the house, what other agents are saying, what other buyers are saying, etc.

This is information you wouldn’t get without that bully offer.

I started to notice the ineffectiveness of bully offers in February of 2010 when I had three straight bully offer attempts rebuffed!  One house in Riverdale had already received four bully offer attempts before mine!  Don’t worry – we got that one on offer night. 🙂

But I suppose that sellers are refusing to believe that a buyer who makes a bully offer won’t be back on offer night.

We used to use standard rouses like, “My client is in town for one day,” but those attempts are beyond transparent at this point.

I believe that a very small percentage of bully offers are actually worthwhile to the seller.

Then, you have cases like what happened in North Toronto last Friday.

A home was listed at $2,395,000 and received a bully offer of $2,850,000.

Um, yeah – the sellers accepted that one!

Was it worth it?

Would the buyer have been able to get it for less on offer night?

We can only speculate.

But that is a bully offer worth taking!

Most bully offers aren’t worth the paper they’re printed on, and that’s why they’re “losing their bite.”  It’s not because they’ve lost the element of surprise, in my opinion.

Now if I could just run off on a cynical, sarcastic, borderline mean tangent for just a moment, consider the following quote at the end of the article:

“He already has a couple of clients who say they will just sit back if a house attracts more than one offer.”

I work with buyers and sellers who come in all different shapes and sizes, but all of my buyers and sellers (I mean the ones I work with) have one thing in common: they understand the market.

Somebody who says, “I refuse to be in competition on any property” does not understand the market.

Multiple offers happen; deal with it.

I wish they didn’t, but they do.  And it’s been going on for as long as I’ve been in the business.

So when somebody says, “I refuse to be in competition,” all you can do is show them houses that are over-priced, or houses that are rotting from the inside and out.

Sorry to be so brutally honest, but we’re not miracle workers here.

My colleague received an email last week from a guy who said, “I’m looking to get into the market but I want a great deal.  I want something that is 20-25% below market value.”

Yes, and I want this: