I rarely wade into these waters.
Discussing the value of a real estate agent in an open forum is never going to convince those who already have their minds made up.
And I can’t exactly blame people, since I regularly go on record saying that an overwhelming majority of licensed Realtors in Toronto are complete garbage.
So can I expect support when I talk about the value of a top agent?
I’ve written about the big-c before on a few occasions; commission.
It’s a bad word in real estate and it rubs people the wrong way.
It’s another argument I’m never going to win with the masses, and again, I don’t blame people. But if you sit back and look at it from a rational viewpoint, there must be a “reason,” right? A reason why top agents continue to transact while employing their traditional business model? To be more specific: there’s a reason why an individual such as myself continues to be supported by a loyal, established client base who are oh-so-happy to refer and recommend.
It’s not because all those people are stupid, right? Can’t it be because they see value?
I’ll leave it there because I’m not looking to sell anybody today, or convince, or turn. But rather, I want to tell a story about what happens at the, um, how do I say, other end of the spectrum…
A few months ago, I sold a rather unspectacular, run-of-the-mill condo in the downtown core. There was nothing really interesting about the location, the building, the unit, or the transaction itself. The story lies within what happened after the Agreement of Purchase & Sale was signed.
The buyer agent was as nice as they come. He was a gentleman and great to deal with.
But having said that, he was a discount agent. I don’t say that in a derogatory way, but rather I am mentioning that this was the business model of the individual with whom I worked, and the company that employed him.
Say what you want about part-time, and/or discount agents, but I’ll simply leave it here, and let the story speak for itself.
My seller-clients are experienced investors who work with a top real estate lawyer. I use the word “top” not to describe his fee structure, or the floor on which his swanky, Bay Street law office is located, because I assure you that neither describes him. But he’s a “top” lawyer because of his experience and stature, not to mention his knowledge and capability.
Working with these clients and their lawyer is an absolute pleasure. They’re so sharp, the whole lot of them. The group emails are succinct and to the point. They problem-solve. They’re quick to address issues, and they diligently respond to emails in a way that you’d expect from individuals at the top of their game.
On the day that this sale was scheduled to close, the buyer agent called me and said, “We have a problem.”
Note the word “we” in that sentence. We’ll come back to that…
He explained that the buyer was unable to obtain title insurance for the condo, and that since the sale was scheduled to close today, the buyer needed an extension.
I told the agent, “You don’t need an extension, but rather you want an extension.”
He said, “No we need an extension because we don’t have title insurance.”
I explained that they wanted title insurance, but didn’t need it. Title insurance isn’t a requirement to close a transaction, and while most people want title insurance, the presence or absence of title insurance does not and can not hold up a closing.
“David, the buyer’s lawyer can’t get the insurance done. He’s been trying all morning.”
“All morning?” I asked. “Do you mean to tell me that he left this until the day of closing?”
There was a long pause, and the agent said, “I’m not going to tell a lawyer how to do his job.”
“Well you should,” I told him. “Apparently, you should! He left this until the eleventh hour? This is his problem and his buyer’s problem, not ours.” I explained. “This has nothing to do with me and you,” I further explained. “There’s nothing me and you can do at this point.”
That’s when he said, “Yes, but we can do something because I’m asking you to get your client to provide the extension since the lawyer already said ‘no’.”
Ah, there it was.
The buyer’s lawyer requested an extension, since he messed up and didn’t get title insurance on time, and the seller’s lawyer said “no.” So their solution was to have the buyer agent try to convince me to convince my seller.
Got it.
“You told me that we have a problem,” I explained to the other agent. “It sounds like your buyer has a problem because he hired the wrong lawyer.”
Call me curt, or even call me a jerk. But in cases like this, I would rather be honest and accurate than be nice.
Amazingly, the buyer did not close!
The buyer was in breach of contract because he and his lawyer simply chose not to close, and to spend more time attempting to get title insurance.
The deal closed three days later, and all was well.
Until it wasn’t, it seems…
Three weeks after the sale closed, I received another group email from my clients and their lawyer.
“It seems the buyer’s lawyer didn’t request that we transfer the deed to the parking space,” the lawyer wrote. “Shall we proceed and transfer?”
This was incredible. And not in a good way.
The buyer’s lawyer not only didn’t request that the deed to the parking space be transferred, but he clearly never noticed that the sale came with a parking space. How else could you explain this?
I’m not a real estate lawyer, but I would imagine that they have some sort of process upon closing; some sort of “checklist.” How in the world did the lawyer miss this? It’s like taking your three kids to a movie, and only coming home with two of them…
And imagine what the buyer went through as he realized what had happened?
The buyer went down to the concierge to re-program his parking FOB, only for the concierge to say, “You don’t own this parking space.” The buyer assured the concierge that he did own the parking space and that he had bought the condo and closed a few weeks ago, but the concierge showed him the ownership register, which displayed my clients’ names.
I have to think this buyer took his lawyer to task, no?
We’ll never know. But I’m going to assume the lawyer avoided saying, “I messed up,” and likely provided an explanation. I’m a cynic, what can I say?
My clients didn’t fuss. They laughed, but they didn’t fuss.
“Yeah, transfer the parking deed,” they said.
And all was well.
Until it wasn’t, it seems…
Two weeks later, the buyer’s lawyer followed up again with an email to the seller’s lawyer to say that the locker deed had not been transferred. But only this time, it wasn’t so cut-and-dry.
The Agreement of Purchase and Sale didn’t include a locker.
The MLS listing did. I mean, we did offer a locker for sale with this unit.
But the buyer’s agent didn’t include this on the Agreement of Purchase and Sale, so the deed wasn’t transferred along with the unit.
The seller’s lawyer said, “Please refer to the completed APS which does not specify a locker,” and that should have been it. But you just know it wasn’t.
The buyer’s lawyer replied, “The locker is included in the status certificate.”
But this doesn’t matter.
The status certificate is just a piece of paper, and often they include mistakes or aren’t updated in a timely manner. What matters is what is included in the Agreement of Purchase and Sale, and what legal title is conveyed in that document.
The buyer’s lawyer said, “The locker was advertised on the MLS listing.”
But again, this doesn’t matter.
The inclusions section of the MLS listing could say, “Fridge, Stove, Microwave, Dishwasher, Washer/Dryer, Hot Tub, Trampoline, BBQ,” but if the buyer sees the hot tub and trampoline as a $5,000 call to 1-800-GOT-JUNK, and sees the barbecue as a rusted piece of metal, then the buyer can simply not include those in the Agreement of Purchase & Sale.
What’s listed on the MLS doesn’t matter.
What’s included in the Agreement of Purchase & Sale does.
The buyer’s lawyer went on the offensive and threatened litigation.
Then the emails were forwarded to the sellers and myself.
The next day, the buyer agent called me to ask if I could help with the situation, and here’s where some of you might choose to differentiate between “honest and accurate” and “being a jerk.”
I told him that I could help, but not in the way that he wanted.
I told him that I was going to give him some advice, and that I hoped he would share this advice with his buyer client.
I explained that in all industries, and with all occupations, there are those that are better at their tradecraft and those that are worse. In this particular case, the buyer client hired two individuals that fell into the latter category. Both those individuals advertised themselves as “discounted” in their fields, and the results should not have been unexpected.
The first individual – the buyer agent, neglected to include a locker on an Agreement of Purchase and Sale. The fact that this individual thought or hoped that the locker might be, could be, or would be conveyed regardless, simply adds another level of neglect.
The second individual – the buyer’s lawyer, did not look to purchase title insurance for his client until the very day of closing, and then walked his client into a breach of contract by refusing to close on time. He also didn’t oversee the transfer of the parking space, which was included in the Agreement of Purchase and Sale, nor was he aware that his client had any expectation of receiving a locker, which was not included in the Agreement of Purchase and Sale.
I explained to the cooperating agent that since both he and the lawyer were both advertised as discount individuals in their fields, the buyer could simply look at the cost savings associated with hiring a discount real estate agent and a discount lawyer, and compare to the cost of the result of such actions, in this case, the price of a locker.
Surprisingly, my advice wasn’t poorly received.
The buyer agent was disappointed, but he wasn’t angry.
I think that deep down, he knew that he and the lawyer had both made huge mistakes and that nobody was going to bail them out.
If the buyer chose to do so, he could learn a wise lesson from this experience. I’m not being facetious, sarcastic, or mean-spirited here. This is simply a life lesson that one can benefit from if they’ll allow rationality and logic to overtake emotion.
I’ve shared many of my life experiences over the years on TRB.
Losing my life savings on Nortel Networks at 20-years-old, for example. It cost me $14,000 in the year 2001, but what I learned from that was unquantifiable.
How about the time I got sucked into a timeshare presentation when I was on vacation with my girlfriend at 22-years-old? I wrote about that on TRB
I’ve hired con artists before. A raccoon-proofer at the family home when I was 21. A web developer when I was re-building TRB more than a decade ago. We’ve all been duped.
But we learn from these mistakes and where possible, we try to see the silver lining in that a small lesson learned today saves us from large and costly lesson learned tomorrow.
That’s the way I looked at my Nortel Networks experience of 2001. My dad told me, “This hurts, and this is an expensive lesson for a kid at your age, but this will save you a million-dollar lesson when you’re thirty or forty.”
That honestly seems like yesterday. Folks my age can relate. I know exactly where I was standing in my house at the time, and I can see the look on my dad’s face.
So the question is: will the buyer in the transaction I described above learn from this, or will he choose to ignore the lesson?
He hired the wrong people, plain and simple.
A discount, cash-back real estate agent to represent him in the largest endeavor of his life, and an out-of-town, discount lawyer to facilitate the closing of the property.
Does this seem like a good decision?
In hindsight, maybe not so much…
nogoro
at 7:24 am
I’m thinking the story has a loose end. Did the buyer pay to add the locker, or just went without? What good is a locker to the seller unless they had another unit in the building?
JF007
at 9:45 am
yes complete the locker story please…i am glued to this now :(…
As to what good a locker would be..well it can be rented out i suppose for 25-50$ a month 🙂
Derek
at 10:08 am
David, when did you and the sellers first identify that the buyers failed to include the locker on the APS? How did that conversation go?
David Fleming
at 11:55 am
@ Derek?
Is this a “gotcha” moment? Like, maybe you’ll suggest that we noticed, then didn’t ask the buyer agent, “Hey, do you want this locker you neglected to include on the now-completed APS?”
We noticed when the offer was submitted.
Derek
at 12:02 pm
Geez, not at all, David. Again, more interested in the Paul Harvey “rest of the story”, i.e., what you and sellers discussed about it. How or why they chose not to flag it for buyers? What are they planning to do with the locker that the buyers failed to include? You think you go to long, but sometimes not long enough.
Libertarian
at 12:31 pm
I agree with Derek. Seems like the locker and what happened to it and why could be its own blog. I think you get 1,000 words easily.
David Fleming
at 1:35 pm
Sorry I was being tongue-and-cheek!
I mean, it wasn’t much of a conversation. Whether the buyers omitted it on purpose or by accident, their offer was well below the list price and we negotiated back-and-forth. We completed the APS and only after the deal closed did the buyers object.
The seller owns multiple condos, parking space, and lockers. It just goes back into their inventory.
Derek
at 2:31 pm
And now you know — the rest of the story. Appraiser must remember Paul Harvey, no?
Ace Goodheart
at 3:31 pm
Just scratching my head as to why anyone would tell them about that mistake? Particularly if your seller owns other units in the same building.
The lockers are worth money and can be easily sold to other condo owners in the same building. If the seller still has units in the building, they can hold onto an inventory of lockers and parking spots, and sell them to other condo owners whenever they like.
So there would be no reason to point out that mistake, and no reason to give the buyer the locker. Just sell it to someone else in the building, or keep it and add it to another unit that they own.
Appraiser
at 8:15 am
Yet, when everything goes smoothly and closes on time with no headaches or glitches, many clients assume that they paid too much.
J G
at 12:47 pm
Disagree. It’s fine to hire discount agents if the buyer/seller understands he has to do a lot of due diligence himself.
In this case, if he just carefully read the Purchase Agreement, it would not have happened. It was probably his first or second time buying.
If it means saving 1% of total Price in exchange for a few hours of work, then why not??
(Actually I wouldn’t even call it work, it’s just paying attention)
I would not hire discount lawyer, although all RE lawyer’s fees do not vary that much. Just find someone with a lot of solid reviews on Google.
Marina
at 11:23 am
This was a fun read, and great to see that sometimes people see the actual costs of their mistakes. But the reality is, most people won’t really see it.
A friend of my parents’ was downsizing and selling their house in Markham. Great house, great area. There is a popular agent in the area that they talked to. The agent told them her commission, and her strategy for the sale – standard commission, plus a recommendation for about $10K worth of repairs and cosmetic fixes, plus staging. All in, it would have cost them about $120-140K to sell their $2 million house (give or take). Then a discount agent walked it, and basically shrugged, saying the house would sell anyway, they didn’t need to change a thing, and he’d only take a 1% commission to himself. They shook on the deal on the spot, and he did end up selling the house for them. They were very happy to save ~$50K.
But did they? Because the house sold for just over $2 million, but a VERY similar house a few streets over sold by the rival agent sold for $2.3. Now it’s not the same house. I would argue the friend’s house was better, but what do I know. And maybe cosmetic changes wouldn’t have made a difference because their house was already nice. But the other house was clearly staged and painted. The listing was better. The pricing strategy made sense. I’m going to take a wild guess that the selling agent used all her connections and experience to get every offer possible. I can’t help but think that if the friend had gone with that agent, he would have come out a couple of hundred thousand ahead… But we’ll never know, not really. And that’s what makes the argument so tricky. Every house is different so there is no real proof how it would have gone in this theoretical other sale.
I do know that I’d happily pay the full commission to make sure that I squeeze every penny from my tax-free asset and to save myself some headaches, but good luck convincing someone who thinks realtors don’t work for their money.
QuietBard
at 11:44 am
What was the lesson you learned from the Nortel incident? Did you by chance write a blog post on it?
David Fleming
at 12:01 pm
@ QuietBard
I’ve been writing since 2007, I don’t know where I detailed this story.
The lesson I learned?
Don’t trust anybody. Ever.
I was 19-years-old. My dad’s “stock broker” told me to take $15,000 of my $17,500 life savings, made through summer jobs and penny-pinching from childhood, and put it into ONE stock, thereby ignoring the first rule of investing. He was 60-years-old. He’d been through multiple market cycles, busts-and-booms, and had experience. And yet, this was his idea.
I paid $50/share for 300 shares.
It went up to $52.50 and I thought I was king shit. That was $750 in profit which was half of what I made in a full summer’s job, pumping gas at Sunoco.
The stock went down though. To $50 again. Then $49. Then $48. Then $47. Then $46. Then $45.
He said, “It’s just a paper loss, you’d be nuts to sell now.”
Then one day, it plummeted from $45 to $30. I read this on the “ticker” at the business centre at McMaster University.
He never told me to sell.
I rode it down from $30 all the way to $2.
When it was at $2, he called me one day and said, “I have some Nortel shares I need to get rid of for $1.20 per share. You can have them. I have 1,500 shares.”
So I bought the 1,500 shares at $1.20 per share, pocketed $0.80/share, or $1,200, then sold my 1,800 shares total.
He thought he was doing me a favour – making me a quick $1,200.
But I lost $48 per share of my original 300 shares, or $14,400.
It haunted me for years.
But my dad was right: it was the best lesson I ever learned, and the best money I could have ever spent.
QuietBard
at 6:59 pm
Interesting. Thanks for taking the time to share your experience
Jennifer
at 1:02 pm
I am guessing the condo declaration says that you cannot own a locker if you dont own a unit in the building, similar to parking? In my view, the vendor’s lawyer was being unreasonable since the buyer got the extension anyway. It was foreseeable they would knot have closed without the insurance, and then what they would have sued the buyers? Not a chance. Would have saved everyone hassles if they just gave the extension. Fight the fights that need fighting – American President.
Ace Goodheart
at 1:10 pm
You would be surprised how many out of town real estate lawyers have NO experience in condo sales.
The sale of a condo is tricky, because each element has its own title, so you are really transferring the deed to three separate things, a parking spot, a locker and a condo unit.
It would be like if you were transferring title to a house, and you had to transfer the garage, the house, the driveway, and the shed in the backyard all separately using separate transfer forms and all individually. Many real estate lawyers who have never transferred the deeds to a condo and its accessories, are simply not aware of this.
Sirgruper
at 3:26 pm
Great blog again.
Clearly the agent should have caught the locker and parking. It is in the listing and should be in the Status Certificate. The lawyer part is a very different situation. If the parking or locker are in the agreement, the lawyer should notice. Usually, a lawyer will look at the APS and Status Certificate. They then search Teraview but if a parking or locker was purchased later, it will not show on the previous Transfer and is easy to miss. Lawyers usually then search by name, but sometime the locker or parking that is added is under a different name i.e., John Tom Smith and the unit is John Smith. It makes a different. No excuse but it can happen. This is where high volume real estate law is a problem. A lawyer should go over the Transfer with the client and confirm what they are buying and view a plan to see if it’s the correct one. If the lawyer has 200 deals in a month, he/she is not doing that. There are some really smart and knowledgeable high-volume lawyers but they can’t see it all and rely heavily on clerks that are overworked (until recently). Regardless, the lawyer could have and should have caught this.
The title insurance part is very different and unfair. If this transaction had a mortgage, title insurance is all but mandatory. Often the lawyer gets mortgage instructions a day or two before closing. Sometimes the same day. The lawyer can’t order the title insurance before they have the mortgage instructions. Further, often there is a title reason that title insurance is not quick (such as a recently discharged mortgage on title or two successive transfers or an estate). In this case the lawyer needs more time. This can happen to anyone and to not work with the other side is definitely frowned upon and makes no sense. If the Seller called the deal over due to “time is of the essence” even those the only issue was title insurance, a judge would likely slam the Seller and the lawyer for sharp practice. The Seller’s lawyer, if there is no back-to-back transaction or urgent need for the funds, would simply add a per diem interest payment and something for the trouble and added legal fees and the Buyer’s lawyer would likely say ok. Real estate lawyers for the most part know that they will be dealt winning and losing hands from time to time. They are not litigation lawyers where you try to win each time and are happy to beat the other guy. Real estate lawyers need to have good relations with their fellow real estate lawyers and they (we) tend to work together so that everyone gets what they bargained for. Not sure why your client’s lawyer wouldn’t agree on terms. He may be smart and technically correct, but it’s a very unhealthy way to practice in general.
Ace Goodheart
at 7:09 pm
I would agree. The key here is “mitigation”. If there is an issue with completing the contract, both parties better bend over backwards to make it happen, or risk facing a very angry judge.
If they needed another three days to get title insurance, so they could satisfy their mortgage instructions, then the seller would be advised to give it to them.
Marie Mascarin
at 5:36 pm
Wow. Thank you and this needs to be shared with all those people who don’t understand cost vs price. They clearly were focused on price which is only a portion of cost. But hey there will always be those people out there.
Joel
at 8:57 pm
Are the sellers allowed to own a locker and not a unit in that building?
Sirgruper
at 11:37 pm
In most condo declarations no. You need a residential unit generally to own parking or lockers.
Ace Goodheart
at 10:30 am
Here we go again:
https://www.blogto.com/real-estate-toronto/2022/11/young-adults-toronto-greater-challenges-than-parents/
This thing, apparently now a foundation funded by the Federal Government, is basically my biggest complaint about how the media and its associated third party enablers function.
Read the article and then go to the website.
According to this, it takes 27 years for a couple earning an average income, to save up a down payment for a house.
So let’s dig into this. What is the average price for an actual house in Ontario’s most expensive city (ie, Toronto)? Well, provided that couple doesn’t mind owning a semi, the price is: $1,079,393:
https://wowa.ca/toronto-housing-market
20% of $1,079,393 is $215,878.60
So, what is the average income for Toronto?
Well, it is this $93,947.00
https://www.averagesalarysurvey.com/toronto-canada
So if you have a couple each earning $93,947.00, then you have a total house hold income of $187,894.00 before tax.
How much tax would this household pay? Well that is easy. Go here:
https://turbotax.intuit.ca/tax-resources/canada-income-tax-calculator.jsp
The couple would pay $20,710.00 each in income tax, for a total of $41,420.00 in tax.
So their after tax would be $146,474.00
However, it doesn’t end there. This couple would also be eligible for the first time home buyers savings account,:
https://www.canada.ca/en/department-finance/news/2022/08/design-of-the-tax-free-first-home-savings-account.html
That is 40K each in tax free savings, which can be invested at 5% at least in a GIC and earn compound interest, tax free.
Those home buyers would also get their RRSP contributions, which can be borrowed, tax free, to assist with a down payment on a home.
So we are somehow expected to believe that these people, who are the average folks in Toronto, would need 27 years to save the amount of $215,878.60?
Which means, they would only be able to save a total of $7995.50 each year between the two of them?
Or are the folks behind these “let’s tax everyone’s house and use the money to fund yet another foundation and government department” just making up their numbers?
Remember, the above numbers only apply to Toronto, Ontario’s most expensive city. Everywhere else, that same couple would need to be able to save LESS than $8 K per year, using all of the government incentive programs available to them including 40K per year per person in a fully tax free first time home buyers savings account.
So are they just making up numbers to scare people?
Somebody
at 4:16 pm
I’ve dealt with lots of supposedly sophisticated business people that opt for cheap professional services.
They view lawyers, accountants, financial advisors as useless overhead.
My point of view is that the most expensive lawyer/accountant/insurance you can buy is a “cheap” one. Sometimes because they bill far more hours while an expensive one would only need 10 minutes, sometimes because thy screw up, sometimes because they screw you and there’s nobody to make you whole.
Toronto Life did a story a few years ago about a VERY wealthy real estate family that got wiped out by a long time family advisor that worked for a 2nd/3rd tier accounting firm. Even liquidating all of the partners at the firm couldn’t come close to the damage done.
If you hire Osler, PWC, and RBC and something goes horribly wrong they’ll make it right or you’ll take it out of them in court, eventually. The Lionel Hutz’s of the world have nothing for you to sue/seize, don’t have insurance, and you are SOL.
Sirgruper
at 4:57 pm
An Ontario Lionel Hutz’s (No! Money down!) would have insurance (its mandatory). Also Osler does not want your condo deal unless your also own RBC etc. or your building the condo. That said, quality professional services by a skilled and experienced individual in their specialty is the key. Best is to get referrals from end users that were really happy with the same services.
Alvin Robertson
at 12:26 pm
Hopefully he learned his lesson, and the rest of us can learn from his mistakes.