I’ve said this before, but I’ll say it again: this is going to be “one of those” posts.

Some won’t like the hard truth in today’s blog, but the silent majority will understand.

Competent representation is difficult to find in today’s real estate market.

While I have said on occasion that I don’t want to turn this site, or any of these individual blogs, into advertisements for “Why To Hire A Realtor,” my most recent experience has made me realize that perhaps I should.

I’m not offended if a buyer or seller sees no value in what I do for a living.  That’s their prerogative, and even though it bothers me that a would-be seller might leave $100,000 on the table, because he or she saved $10,000 in commission, you can merely lead a horse to water.

I’ve seen it, time and time again.  I feel sick to my stomach, literally and figuratively.

And then when it comes to buyer agents, the same is true, if not worse.

When an individual hires an inferior listing agent, the house still sells, although just for less.

When an individual hires an inferior buying agent, they often never end up buying.  Some buyers sit on the sidelines for years at a time, often losing a tax-free capital gain they will never make back.

That is what I want to talk about today.

When I say “competent representation is difficult to find in today’s real estate market,” it’s because of the 55,000+ licensed real estate agents in Toronto, only a small percentage understand and can transact in the current real estate market.

The poor buyers that retain the services of these individuals – they just never had a chance, and I feel for them, I do.

When you’re reading this, keep in mind that most of you – the regular readers, are smart.  I’m not saying this to kiss ass, or to try to strengthen my argument in advance, but rather because I see it in the comments section every day and because the blog has always drawn a particular demographic of reader.

Last week, I listed a downtown condo for sale in a highly sought-after location, in a very hot building.

The list price: $498,800.

Now let me get out ahead of the counter-argument I feel I might face today, which is that the old “list low, hold back offer” strategy is unfair, and/or misleading, and/or confusing.

When you see an auction on eBay starting at $9.99, for something you know is worth a lot more, you don’t feel this is “unfair.”  You know how this works.  It’s not complicated.

The concept in our Toronto real estate market is also not new.  This has been around for longer than I have been in the business.

So whether this condo is worth $525,000, $550,000, $575,000, or $600,000, consider that the list price of $499,900, with the text “Offers Reviewed On Monday, November 11th @ 7:00pm Sharp By Email,” is an indication of not only the process for offers and the subsequent sale, but it’s also an indication of the potential sale price.

I’m sympathetic to people who don’t like the “process” of how we deal with offers in Toronto, but it’s not new, and it’s also born of necessity.  I had almost one hundred viewings on this condo.  Isn’t it fair to set a time and date in the future when all parties can present an offer?

Topic for another day, and if you’re stuck on this point, then you probably don’t want to read any further.

This condo was 525 square feet, and when I appraised it during the summer, based on comparable sales and adjustments, the value was around $550,000.  At the time, I told the sellers that if the market in the fall was busy, we’d probably see more.

I knew that once this property hit the market, we’d have a slew of showings.

I told my sellers that 35-40 viewings would be fantastic, but “under promise, over deliver” is often the best course when predicting the number of showings

From the very first day of this listing, the phone started to ring, and it didn’t stop.  That, I don’t mind, and I’m not surprised by.  However, the poor calibre of conversation on each subsequent call was something that I did mind, but sadly, also wasn’t surprised by.

Every single agent with an interested buyer wanted to submit a pre-emptive or “bully” offer on the condo, and rather than actually typing one up, having their client sign it, and submitting the offer, they all seemed to feel as though they were special, and that I should just tell them what to offer.

I can’t tell you how many times I had a phone call that went something like this.

Agent: “Hi, I’m calling about 123 Toronto Street.”

David: “Sure, what can I tell you?”

Agent: “What is the price?”

David: “$498,800.”

Agent: “No, what is the sale price?”

David: “It hasn’t sold yet.  Offers are next Monday.”

Agent: “No, what is the price for the seller?”

David: “Sorry, what do you mean?  What is the price for the seller – what does that mean?”

Some of you will point out that, yes, this agent speaks broken English, but of the agents that called me on this property, I would say this accurately describes 50% of them.  Now I know it’s woke to paint anybody who has commented on anything cultural as offensive, these days, so go ahead.  But I’m not trying to be offensive, I’m merely pointing out yet another reason why it’s so hard for buyers to transact in today’s market: their agents have trouble communicating.

In the conversation above, it continues something like this:

David: “Are you trying to ask me what price my seller is looking for?”

Agent: “Yes.”

David: “My client has no set price here, but rather will accept the best offer on Monday night.  If you are asking me at what price my sellers would accept a pre-emptive offer, I would advise you the following: 1) We don’t negotiate verbally; we would need an offer in writing, 2) I cannot speak on behalf of my seller.”

This is all fair, right?

I’ve told similar stories before, and quite often, the readers will comment, “What’s wrong with asking?”

It’s not wrong per se.  It’s just naive, and shows inexperience.  It also never really goes anywhere, and to argue the other side, for a moment, a listing agent isn’t permitted by law to disclose a price at which a seller, would sell.  It’s literally printed out in the Listing Agreement.

In the conversation above, and/or other conversations this week, I had the following:

Agent: “I don’t know this area very well.  What is the market value? 

Agent: “What comparable sales should I be looking at?”

Agent: “I usually work in Mississauga.  Can you tell me what this property is worth?”

Tell me again that these are fair questions.  Tell me that I have a duty to help these folks.

But heres the undeniable bottom line, as I see it: no buyer in the downtown core should be using these agents.  It’s downright scary that this type of agent is able to attract clients, and what’s worse, is that this situation more common than not.

The first pre-emptive offer I received on the condo was for $550,000, no conditions, and that was a decent offer.  But my sellers decided to wait until the scheduled offer night, and the process was all down hill from there.

The second pre-emptive offer came in at $515,000, conditional on financing for ten business days!

Conditional.  As a pre-emptive.  It made zero sense.  Absolutely, positively, zero sense.

I spoke to this agent.  I tried to help him out.

David: “You’ve given us a conditional offer as a bully, or a ‘pre-emptive.’  We’ve had 40 showings on the condo already, and we have an open house scheduled for this weekend.  Do you think that it makes sense for the seller to forego the rest of the showings, and the scheduled offer date, to tie up the property for ten business days?”

Agent: We would really, really like to get this property!  The buyer loves it!

Well, there’s not much I can do there.  The logic of “my client wants it” doesn’t play a factor in this case.

The next day, we received two more pre-emptive offers; one for $505,000, conditional on financing, and one for $524,000, no conditions.

So let’s regroup here, as there are three issues presented thus far:

1) Communication.  As much as people might not want to hear this, it’s very difficult to work with agents who are unable to parake in a simple conversation, especially when the subject matter is anything but simple.

2) Conditions.  Pre-emptive offers are not conditional.  They’re just not.  There is no debate here, this is how the market works.  This is a simple concept, but so many agents don’t grasp it.

3) Price.  Ah yes, the most important part…

So here’s my issue with price.

Let’s say that you’re, oh, I dunno, a restaurant owner.

Somebody comes in for dinner and orders spaghetti Bolognese.

So you, the restaurant owner, simply take some dry spaghetti, a can of sauce, and some raw ground beef, and you put it on a plate and serve it to them.

You neglected to do the one thing that’s crucial as a restaurant owner: cook the food.

As a real estate agent, when a 525 square foot condo comes onto the market at 123 Toronto Street, you need to figure out what this property is worth.  That’s your job, as a real estate agent.  That’s crucial.

In this case, you can simply go to www.condos.ca, which many people do, and find the average price per square foot, which is $1,037.  This practice of finding the PPSQFT is common among both buyers as well as buyer agents, even those who don’t work for Condos.ca.

In this case, that published figure would provide a value of $544,425 for the condo.

But of course, the average price incorporates 1-bedroom units and 2-bedroom units; smaller and larger, with and without features such as parking, terraces, et al.  So clearly this is merely one way to look at value.

An experienced agent would take a sample of the last year’s data, make adjustments for those features noted above, plus appreciation, and come up with an adjusted price per square foot, which may be more accurate.

A third option is looking for the last sale of this particular model unit, which in this case, is a $525,000 sale in November of 2018.

Okay, great!

How much has the market gone up since November of 2018?

Using the average 416 condo price of $595,678 in November of 2018, versus the average price of $662,631 this past November, we see that prices have increased by 11.2%.

We can also use the 416 HPI as a metric too.  $844,600 in November of 2018, versus $897,200 in October of 2019, represents an increase of 6.2%.

So that would provide apples-to-apples values of $583,800 and $557,550 respectively.

Here are three different ways of arriving at valuations, and they provide estimates of $544,425, $583,800, and $557,550 respectively.

So then why in God’s name are people offering $505,000?

And don’t tell me it’s because the property is listed at $498,800, and this is all my fault.

Whatever happened to personal responsibility?  Where’s the accountability on behalf of these agents?

Where is the knowledge, experience, and professionalism, let alone a very basic understanding of the real estate market?

I have written blogs like this in the past, but this one really strikes a chord with me.

I feel for these buyers, I really do.

I’m looking at one of these offers right now – $515,000 purchase price, $5,000 deposit, and conditional on a review of the status certificate, financing, and home inspection.

Seriously?

When you submit an offer among sixteen competing offers, and you include THREE conditions, forget about your low price and deposit – those three conditions alone are like saying, “I’m doing everything I can to not get this property.”

One condition is the same is two, which is the same as three.  A conditional offer, in competition, is likely going nowhere.  But, I mean, conditional on inspection?  A condo?  I just don’t understand the logic here.  And sadly, neither does the agent who’s submitting the offer…

Tough love?  Brutal honesty?

I pull no punches here, folks.

Hate the game, but I’m telling you how the world of Toronto real estate actually works.

Of the seventeen offers I received on Monday night, only six really had a shot.

The following offers boggle my mind:

$505,000 (3 conditions)
$510,000 (2 conditions)
$510,000 (3 conditions)
$515,000 (3 conditions)
$516,000 (1 condition)
$518,000 (no conditions)

This same model sold one year ago for $525,000.

Has the market gone down?

I don’t understand.  Go to Condos.ca and see what the average price per square foot is going for.

Look at the sales history in the building.

Find the last model of this unit to sell.

This is NOT rocket science!

And yet here I sit, with offers in the low $500’s.

The property ended up selling for over $600,000 by the way.  But that’s not the point.  It could have sold for $560,000, and I’d be making the same argument.  All those buyer who had offers between $560-$590K had a reason for picking their number, which is some combination of their own valuation and their affordability.

Not all buyers are created equal, and some have more or less market knowledge than others.  Some lack, or possess, common sense, analytical capabilities, and other traits that may or may not make them qualified to transact in the real estate market alone.

Some folks want to offer the argument, “Buyers are offering what they can afford,” or simply “Buyers are offering what they want to offer,” but I don’t accept that.  Why would anybody walk into the desert with no food or water?

And the sad part is, I’ve come to realize that it’s not the buyer’s fault.  The whole reason a buyer hires a buyer agent is to provide experience, guidance, advice, and expertise.

What I saw this past week from the buyer agent community is appalling, and you know what?  I should turn this blog into an advertisement for “Why to hire an agent.”  A good agent, that is.

Navigating the world of downtown Toronto real estate is hard enough as it is.

It’s not much easier when you’re running around blindfolded…