2017 has been absolutely crazy thus far in the Toronto real estate market, and I think my blogs have accurately reflected that.
But the biggest problem, aside from the rising prices and lack of inventory, is how offers and specifically multiple offers, and/or bully offers, are being handled.
This week, I’ll cover this in two parts – how offers shouldn’t be handled in Monday’s blog, and how offers should be handled in Wednesday’s blog.
So basically you’ll hate all real estate agents after reading Monday’s post, and then you’ll think I’m patting myself on the back a wee bit too much after Wednesday’s blog…
Last Monday was an interesting afternoon.
I took my buyer clients to see a property on Dundas Street – a multi-unit, investment property, priced at $599,000, with offers, according to the listing, being reviewed nine days later.
We walked through the main floor, and when we came outside to head around to the back unit, I encountered a man on the street that seemed really interested in the property.
He kept asking me questions, as I kept trying to politely move along with my clients, but he piqued my interest when he told me, in a very thick accept, “Why you show dis house? Dis fuggeen sell two dayze ‘go.”
Pardon?
It sold two days ago – is that what you said?
The man went on to tell me that he was “the guy” in this area, owned 40 properties, and nothing happened in this area without his knowing.
“Dis agent,” he told me, “Dis guy ees joke. Work in 905, no here. He no care bout anybody, anything. He make a deal dayze ‘go.”
The man pointed to the agent’s photo on the FOR SALE sign and said, “Look at eem. He like teenager, not even hairz on his balls. Ju tink he care about your ‘rules’ and all dat? He mak’a sale, no tell anybody.”
This guy was so real, that he couldn’t be fake.
I ended up chatting with him a bit more after my clients had seen the house, and left. He checked out – he really did own 40 properties, and as I found out later on, this house really did sell two days previous.
And what amazed me, or maybe no longer does, in this market, is not so much that the house was sold eleven days before the scheduled offer date, with no advance notice. But rather that this agent, and/or the brokerage, didn’t have the decency to call agents who had booked appointments, to tell them they were going on a fool’s errand.
That Monday afternoon, I wasted an hour of my time showing a house that had already sold two days before-hand.
This is how a lot of agents in today’s industry choose to transact.
And the man I met on the street was right. This agent didn’t care, and he’s not looking to build a brand, a reputation, a good standing, and a career. He’s looking to do a deal today, and then take tomorrow as it comes.
I wrote a blog last week called, “It’s Official: Every Property In Toronto Has An Offer Date.”
It was my cynical take on the market, and the fact that those properties that don’t actually have an offer date, are basically entertaining offers the very second they hit MLS.
And in this blog, and many others this year, I talked about how bully offers are making for an insane 2017 market.
Every day, when a property hits the market with an “offer date” scheduled six or seven days later, buyers and their agents scramble to to get into the property asap, and try to make a bully offer the same day.
What it means, for the most part, is that most properties with “offer dates” scheduled for six or seven days later, really have offers now.
Some agents are writing “Seller Will Not Entertain Pre-Emptive Offers” on the MLS listing, but that doesn’t stop buyers and their agents from submitting them anyways.
So while you might be quick to blame a buyer agent for submitting an offer on a listing that clearly specifies, “seller will not entertain,” the conversation is really about how the listing agent chooses to respond.
Call me naive when I say this, but I’ve always thought that real estate agents need to work together, not against each other. You’re as good as your reputation in this business, or better. So I can’t understand why any agent, experienced or new, would take short-cuts, or even go out of their way to make enemies in an industry where having friends is so powerful.
Some agents are truly out to make money today, while sacrificing tomorrow.
And while I understand how hard it is out there in 2017, I still think that agents need to keep focused on the long term, and avoid jumping in the mud with the people who will be out of the business in a couple years.
To start 2017, we noticed a new problem with how some agents are choosing to work with bully offers, and it was extremely troubling.
When a bully offer is registered on a property that has a set offer date, it’s the listing agent’s responsibility to inform “anyone who has expressed an interest in the property.” We’ve discussed this before in other blogs, but for the most part, consider that the bare minimum an agent needs to do is call the buyer agents who have booked showings.
That’s a rule, folks. It’s not a suggestion.
So imagine our response when we started to see this early in January:
Reeeeeaaaaaaally?
You reserve this right?
It’s like reserving the right cheat on your Grade 12 final exam.
Just because you reserve the right, doesn’t make it okay.
Now, I’m a pretty responsible person, so when there’s a matter in question, I often seek a second opinion, or go to greater lengths to satisfy myself of the correct answer. So after reading this on MLS, I told my wife, “Hey babe, I’m just letting you know what I reserve the right to sleep with high-class escorts at the Sheraton Hotel on weekday afternoons.”
In the end, it seemed my hypothesis was correct.
You’re not allowed to reserve the right to review pre-emptive offers, without informing others.
It’s a complete slap in the face to your “colleagues” who are booking showings on your listing.
The entire underlying principle of the “Multiple Listing Service” is cooperation.
So when somebody uses the MLS system, and basically says, “I’m not going to cooperate with you,” they’re thumbing their nose at the system.
When this listing hit MLS, the broker/manager of this company was flooded with calls.
That listing was edited within 12 hours.
But it didn’t stop the trend from continuing, as I saw this a few days later:
But the following listing took things to yet another level.
The underlined text says basically the same thing – “without informing others,” which is pretty bad.
But what else do you notice?
Look where this was written.
Under the “Mortgage Comments.”
Was that meant to be sneaky, or was that just their attempt to use all the space provided on other information?
Unfortunately, it’s the former. You get 243 characters in the “Brokerage Remarks” section, and they could have fit the underlined portion, but chose not to.
So not only do you have a listing agent who is pointing out that they plan on making their own rules, but they try to make sure you don’t notice.
Why bother?
If you’re pointing out that you’re not playing by the rules, why try to hide it?
Perhaps the problem is, in this market, some of these agents don’t know they’re not playing by the rules. Maybe they figure that they just get to make their own rules up as they go.
There’s this sentiment out there that “the seller holds all the cards.”
Notice that in all three listings, they say “The seller” in respect to who is reserving this right.
Blame the seller. It’s the seller who wants this, not the listing agent.
I think all real estate agents agree that the seller should get to do as he or she feels fit, but this is where we get into a grey area, since the seller, at the behest of the agent, isn’t playing by the rules.
It’s just too easy for agents to claim, “It’s not my fault – it’s my seller!”
That argument just can’t hold water anymore.
Now as bad as the above is, it’s the exception to the rule.
I called it a “trend,” but we saw maybe a handful of cases, and I’m proud to say that the management of Bosley Real Estate was instrumental in the crackdown of these practices, spending hours on the phone with TREB, RECO, and other brokers and owners.
But the mere fact that listing agents are trying this garbage shows that we’re quickly losing respect for each other, and going a level beyond “dog-eat-dog,” whatever that may be.
I’ve been involved in a few multiple offer melee’s this year, and I’m not seeing them handled as well as they could be.
Many of you have been through this process.
Offers are at 7:00pm, presented in person at the property, and the street is lined with cars.
Agents go in one at a time to present, and some agents – although I vehemently disagree with this approach, actually bring their buyers with them. Why add the anxiety, stress, and drama? What could the buyers possibly need to be there in the car for?
Personally, I think in 2017, with technology where it is, the in-person presentation is ridiculous.
Especially when you have 20 offers on a property.
A colleague of mine was on an offer last week, and with offers at 7:00pm, she was in her car outside the house until 12:20am.
There were 22 offers on that property.
If all agents presented in person, that’s about 14 1/2 minutes per offer.
But the part that bothers me is, the agent didn’t call her until 12:20am, but she lost by over 15%.
Why wouldn’t an agent make a courtesy call, and let the “badly-beaten” agents go home?
Another colleague of mine was on an offer with 17 competing bids, and after reviewing them all, the listing agent sent ALL EIGHTEEN offers back for a “second round.”
Why not tell the holders of the “dummy offers” around the list price that they can go home?
In 2017, I’ve seen it all, folks.
Bully offers are out of control.
Listing agents aren’t keeping buyer agents informed.
In-person offer presentations are going all night.
I know I’m giving the realtor-haters ammunition here, but remember that this isn’t an attempt to paint the whole industry with the same brush, but rather to point out the actions that could easily be done without.
So on Wednesday, let me explain how I am personally handling listings, multiple offers, bully offers, and the offer process in 2017.
It might sound a bit self-congratulatory, but I’m convinced that if I set an example, others will follow.
And we have to start somewhere, right?
Ed
at 8:18 am
Obviously there are more than a few bad apples which is to be expected. But what is TREB or RECO or whoever doing to crack down on them?
It appears that they are doing next to nothing and that is why the industry gets a bad name.
natrx
at 10:24 am
It’s hysterical mania right now. Mainly due to those that lose going nuclear on their next options. Also, the low supply is making it much much worse. I more than guarantee this sluggishness is largely due to the HIGH Land Transfer Tax and also now relatively large Value on the realtor selling costs.
I mean to upgrade to the same priced house now, you’re looking at 80K in Toronto to move. Why move then? Just use that money for a nice vacation, renovation, whatever.
jeff316
at 11:01 am
Yup. It’s not the lack of supply, or the high prices – it’s that four percent that is keeping everyone in their homes.
Not Harold
at 11:52 am
Anecdata – but I have seen this discussion with many people in super prime neighbourhoods. They were thinking about moving but live through a renovation because of how much they lose in transaction costs. Think $3MM houses and up… 10% (2.5% to province, 2.5% to city, 5% to the agents) covers one hell of a lot of renovations and it’s hard to find a place to buy that is fully done how YOU want it. So moving for an extra $500k+++ in house value and losing out on $300k++ in transfer costs doesn’t mean you won’t have to spend another few hundred k or more on renovations of the new house. Figure that a trade for an extra $500k in house actually costs about $1MM versus staying in the current house.
If you’re already a short drive to Branksome/BSS or in catchment for Whtiney/Blythwood/OLPH… what can a $500k reno do to your house to solve the issues you have? Or an $800k reno?
If you are in a 15 foot wide semi, or even worse if you’re in a gentrifying neighbourhood with less than perfect schools, then yeah, you have to move. But if you’re in a decent 4 bedroom on a good lot that could be better, or bigger, or whatever… Then it’s a hard decision.
Geoff
at 5:08 pm
I get that.. but I’m not moving because of some $50,000 tax. I’m not moving because now I have a $200K mortgage house on a house worth $1.3. But to move to a better neighbourhood and keeping the same style of house (detached, yard, etc) I’m looking at $1.8M, easy. So ($1.3M – $200K mortgage – 1.8M house) = new mortgage of $700,000. That’s what keeps me put. I’d happily take on a mortgage of $400K to move up. But $700K? No way.
GinaTO
at 3:58 pm
Same here, Geoff. To move up in size we’d have to spend at least 1.2$ (conservative estimate – might be as high as 1.5$). So even with a healthy down payment, I’d trade my $350K mortgage for at least $800K, which means doubling my monthly payment. No way. Plus, as someone mentioned, it still doesn’t mean the more expensive house will have what we want anyway.
That, and the fact that we are walking distance to the school where kiddo will start JK in the fall, so we’d want to stay in the neighbourhood… it will be reno-land for us.
Some guy
at 10:28 am
The purpose of a rule requiring listing agents alert other agents whose clients have “expressed an interest in the property” is to ensure that sellers can get the best price for their property (i.e., an interested buyer is alerted that a bid has been registered on a property, and so rushes in his own bid and defeats the initial bid, thereby generating top dollar for the seller). Getting top dollar is in the seller’s interest (which the listing agent must put first as a fiduciary). A positive side effect of the rule is that agents cooperate and can better plan their working lives, but this is not the primary purpose.
Geoff
at 11:58 am
@ natrx – You know I remember when the toronto Land tax came out and I believe the realtor company line was it would hurt sale prices….
@ David and others – can someone explain to me who it benefits the seller to NOT let other interested parties make a bid when one’s on the table?
Mike
at 4:13 pm
@ Geoff
As for the offer question; it’s fairly simple. If you’re negotiating an offer, offer on the table as you put it, you’ve made an obligation to sell under the terms in what you’ve signed back. If you were to negotiate with another interested party, then there is a very real chance you could be stuck selling the home twice. If you sold me the same house twice I’d go after you for the difference in what we agree on and the “similar” house at a higher price I purchased instead.
Xi Dada
at 4:32 pm
I also have this same question. If I was a seller, how could I possibly not want to see any and ALL offers??? It would be completely against my interests not to have other potential bidders errr I mean buyers be informed about an initial bully offer. Do sellers not want to get the most money for their property??? Are they in that much of a rush to sell?
Mike
at 11:47 pm
A good bully offer is structured to prevent you from shopping it around. Deposit on hand, strong price, short time frame in which a seller must respond.
You could wait until offers are due but then you might loose a great offer that has everything you want. You also have 100’s of people walking through your house, having to pretty much be out of your house the entire time it’s on the market. That’s huge factor.
I’ve known people who’ve rejected bully offers and never seen anything close in the rest of the bids.
Condodweller
at 11:06 am
I think so as well. If I received a bully offer on my house several hundreds of thousands of dollars above fair market value I would not want to take my chances a week later without that offer. I think a properly priced bully offer actually makes life much easier on all parties involved. It eliminates these time-consuming anxiety filled offer nights altogether. Who couldn’t do without hundreds of people going through their home?
I fully agree that the transaction cost is the prime cause of short supply and high prices. I know it has been said that someone moving from one house to another doesn’t add to supply but I believe it would at the very least increase inventory thereby increasing supply, admittedly artificially, but an increase nonetheless.
Mike
at 1:45 pm
Geoff,
You’re example was a pretty good example of a bully offer. Offer came in at 5:05, leaving little time for others to pull together a deposit cheque at the bank (yes, I believe TD is open later) eliminating a lot of the competition solely on the fact that they can’t submit a deposit.
You’d want a certified deposit with any offer because it eliminates an out for the buyer (in theory) and you need a conveyance to make an agreement legal. The last thing you’d want is to have the bully offer come in with a certified deposit that expired at midnight, call all the interested parties and then accept a higher offer without a deposit only to find out the next morning that the highest bidder had second thoughts when they sobered up and all you have is a piece of paper.
I don’t think a bully offer would grant the seller 7-hours to respond; bully offers are pretty much take it or leave it.
Geoff
at 5:10 pm
I get that – but what stops you from just notifying all the interested parties that you’ve received a bully offer? like bully offer comes in at 5.05 with expiry of midnight. With cellphones now how hard is it to send out 5 texts to the people who came in to the open house? unless there was no open house, but other than that…
Condodweller
at 8:20 pm
For sure, already booked showings should be canceled. It’s totally unprofessional and disrespectful the agent doesn’t do that.
Kyle
at 6:46 am
@ Geoff
You’re right, those remarks are meant to increase the likelihood of the selling agent being able to double-end. So, it’s mainly for the selling Agent’s benefit, unless he has some kind of agreement with the seller to reduce his commission if he double-ends.
Condodweller
at 11:13 am
“He kept asking me questions, as I kept trying to politely move along with my clients, but he piqued my interest when he told me, in a very thick accept, “Why you show dis house? Dis fuggeen sell two dayze ‘go.””
As a lawyer would say “it speaks to charachter”
I find it incredible that one person would own 40 properties in one neighbourhood. David, it wasn’t Kyle by any chance was it? Question withdrawn 🙂
Kyle
at 5:00 pm
Frankly, the frequency with which you feel the need to mention my name when making comments is creepy.