The Friday Rant: A Day In The Park With My Boy Garth

Business

6 minute read

April 5, 2012

Garth Turner and I have exchanged barbs over our blogs in the past couple of months, but I honestly think Garth and I could be friends!

I think he misunderstands me, and in fact, he and I share some of the same views about the frustrating process of multiple offers

I only have three things against Garth Turner after his blog post last week:

1) He called me “unethical,” when he doesn’t know me personally, and when I have the highest ethics of any Realtor that I know of.  I never called his ethics into question when he was suspended by the federal Conservative caucus in 2006 over allegedly breaching confidentiality.

2) He quoted my take on the “multiple offer scenario” that I described while on CTV’s Canada AM last week, but he neglected to add that I’ve always gone on record saying I hate how multiple offers are handled in Toronto, and I wish there was a more transparent, more fair system that we could work within.

3) He hasn’t acknowledged that despite calling for the collapse of real estate over the past several years, it’s never happened, and his book “Greater Fool” from four years ago has proved incorrect.  You can’t predict, every year, in perpetuity, that the market is going to collapse and then when it does, claim “See – I was right.”

Other than that, I think Garth and I could be friends.

Garth posted on his blog last week about the practices in our real estate industry when multiple offers are involved, and he used me as the scapegoat.

I was on Canada AM and when asked for five tips to help sell your home, I used “Pricing” as one of them.  I said, “Like it or not,” before I described under-pricing in our market, and had I been afforded more than ten seconds to make a five minute point (WOW is tv ever tight for time!), I would have elaborated on the practice and encouraged those people who don’t like it to stay on the sidelines, and perhaps called for some change to our industry.

Garth took this and ran with it, calling me “unethical” and using my example as proof.

But I’m really just reporting about what’s going on!

Case in point: you don’t get $595,000 for your $550,000 house by pricing it at $595,000.  It’s impossible.  The only way to do so is to price it at $499,000, and start a bidding war.

Am I wrong?

Is this news to anybody?

This is the way it’s been for the better part of the last decade, and although we long for the days when you could wait three weeks to make a decision, and then offer 85% of the list price, those days are not yesterday, not today, and it doesn’t look like it’ll be tomorrow either.

The market is hot.  It has been for some time, and it will continue to be, at least in the foreseeable future.

A capitalist would say, “If you don’t like the rules, and the way the game is played, then stand on the sidelines.”  In fact, many of these capitalists posted comments on Garth’s blog saying exactly that.  Many people disagree with the “bitching” about bidding wars, because it’s part of the process, and part of a free market.

But believe it or not, I tend to agree with Garth.

There should be more rules; any rules, to help protect our integrity in the real estate industry, and avoid catastrophe.

I have always hated the multiple offer “process” for one major reason: there is no defined process.

It’s the Wild Wild West, where anybody can do anything at any time, with no repercussions.

Garth says people are complaining to the Real Estate Council of Ontario, but is that doing any good?  Should we be complaining to OREA, TREB, CREA, or RECO?  What about the Competitition Bureau?  What about the local police?  What about our grade five French teacher?

My stomach churns at the thought of bein in not one, but two multiple offer situations tonight, as I sit here and write this.  And I wonder how the offers are “going to be handled.”  I say this because, as Garth says, many Realtors have no ethics, and are led by greedy sellers that look to screw buyers over, by promising one thing, delivering another, and then sending buyers back to add more money, again, and again, with no end in sight, and no blueprint to follow.

Again – a capitalist and a free-market enthusiast will say “stop complaining,” but I’m not complaining about the idea of “winner takes all,” but rather the idea of there not being a documented system and protocol for the handling of multiple offers.

Does it bother you when a listing agent promises, “This is a one-shot deal; highest offer takes it,” only to return an hour later and say, “I know I said I wouldn’t do this, but there are three offers that are all really close, so we’re sending them back”?

Does it bother you when a listing agent reviews twelve offers and sends them ALL back to “improve?”

Does it bother you when a listing agent tells you, before any offers are even reviewed, “Yeah we’re going to review the offers, and then give everybody a chance to improve”?

That last one bothers me to no end!  I rhetorically ask, “How can you know that you need to send offers back when you haven’t even seen them yet?”  I usually get a sarcastic response like, “You know how it goes, buddy.”

I wish there was a better way.

But who is going to show us the way?  Who is going to implement a system, and who is going to monitor it?

RECO doesn’t have the resources to investigate all complaints – even those that are blatant!  Do they have time to monitor thousands of offer processes every single night across the province?

Garth talks about “Price manipulation, false advertising and manufactured bidding wars,” and he’s absolutely right.  These three things go on every single day of the week.  But who is there to stop it?  The sellers aren’t stopping it, and the buyers aren’t walking away.  It’s like everybody complaining about the Leafs being awful, and yet the arena is still sold out every night.

Garth’s point about false advertising strikes a chord with me, because often it’s so painfully obvious, and borderline unfair.  But let’s go back to that million-dollar bungalow in Willowdale for a moment.  It was listed at $759,000, and it sold for $1,180,000.  Shouldn’t we fault the buyers and their inexperienced Realtors for submitting offers of $850,000 or $950,000 when similar properties have sold for $1,000,000++ over the last six months?  I think the seller should be free to list at $759,000, or even $1.  It’s up to the buyers and their agents to look at easily-available information and realize that the property is worth $1 – $1.2 Million, and in the process, avoid a bidding war that they had no process being in in the first place, and actually helped to spark with their own inexperience.

Is this actually false advertising?  Or is this just like an Ebay auction where you can set a reserve price that has to be met?

While I don’t agree with Garth’s claim that this is “fraud,” there are situations where it almost could be.

Case in point, this is an email I received last week from the listing agent for a property on Concord:

Good Afternoon,

There is currently an offer on this property that expires at 5pm today so we are open to offers.

If the current offer, or any competing offers are not accepted, we are reviewing offers on April 5th.  Please register by 6pm.

Do you see what’s happening here?  Because I do!

This listing agent has just demonstrated false advertising!

Look at it like this…

Let’s say a property is listed at $599,000, and the seller turns down an offer of $620,000.  The next day, that seller has to list the property at $620,001, otherwise the seller would be guilty of false advertising.  You can’t advertise a house for sale at $599,000 when you have made it known, through your actions of reviewing and rejecting an offer of $620,00o, that you would not accept either of those prices.

However, the email I outlined above clearly demonstrates the intention of false advertising.

The seller is basically saying, “We are going to review offers on April 5th, but we received a bully offer today.  As such, we will review offers and hope to be blown away with something.  If we are not, then we will reject all offers, and continue with plan-a of reviewing offers on April 5th.”

So what if this happens: somebody offers $650,000 on that house, priced at $599,000, but the sellers decide to wait until April 5th in hopes of more.  The next day, when they don’t change their price to reflect that they turned down a price higher than asking, then they are indeed guilty of false advertising.

When they turn down that offer of $650,000 on Monday, and wait until Thursday to take offers, they are guilty of false advertising for three full days.  And it’s obvious too.

I have two major issues with this:

1) The listing agent is guilty, but either doesn’t know it, or doesn’t care.

2) I don’t see any repercussions.  How can you stop them?  Who is going to stop them?  And how can you possibly act so quickly?

This agent will be blatantly guilty of false advertising – having turned down an offer of more than the asking price, yet continuing to offer the property for sale at the lower price, and I’m of the opinion that nothing can or will be done about this.

And that, ladies and gentlemen, is where Garth Turner is right about the plight of our industry.

Garth and I have our differences, and I’m not the one that opened the door to the mud-slinging by bringing up ethics and calling me a “shill,” but he is right that there are a lot of very shady practices in the real estate industry when dealing with multiple offers.  But is there any industry without shady tactics and a few bad apples?

I can’t agree with Garth that “this is fraud,” because that, by definition, is something entirely different, and calling it “fraud” is reckless and without merit.

But I echo his well-worded sentiments that “this sucks,” and I wish there was a better way.

If Garth has an answer, I would love to hear it.

So, I’m all ears.  And I just might agree.

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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69 Comments

  1. Moonbeam!

    at 7:45 am

    Good post Dave… I believe you are being more than fair to Garth… Let’s remember that Garth is not a realtor, he is a writer who has dabbled in various jobs….

    1. bob

      at 12:26 pm

      Are you joking? A realtor who knowingly participates in a scheme he believes is unethical is even worse than the “ones” who believe what they do is not fraud.

      It’s the same as a criminal using “well, everyone else was doing it” is his defence.

      I can’t believe how the real estate industry justifies screwing people.

      1. Chris McKee

        at 1:28 pm

        As Dave pointed out, you’d have to accuse the whole of Ebay’s business model and clients of doing exactly the same thing, and we don’t because a $12 tea pot doesn’t offend the senses as does a $750K house. In reality, they are both just products whereby the owner is trying to fetch the highest price.

  2. jeff316

    at 9:19 am

    Re: false advertizing: how do traditional auctions or eBay get around this? They often have items that are up for sale, get bid on and then are not sold when they don’t meet the reserve. Is it that the expected ‘price’ of each piece is not officially advertized?

  3. Ralph Cramdown

    at 9:25 am

    I don’t think anything is going to change. Your industry is trapped in a situation where public perception is that you charge too much and most of what you do could be replaced by a good website. How do you add technology to solve the multiple offer problem without confirming that belief? Plus, you’ve got this oddball self-governance system where the failures get to steer the boat: One license, one vote at TREB, but most license holders are new to the biz or doing a subsistence-level/part-time volume of business. The new ones are all hoping to be big, successful agents in the current model one day, and are willing to work long hours at crap pay on the chance they’ll make it. See “Gang Leader for a Day.”

    But here’s some ideas to improve the whole multiple offers thing: 1) Don’t improve when all offers get sent back. Why would you? You’ve got no new information (except that the listing agent is a snake), and absent new information, why should your bid change? Game theory 101. 2) Agree in advance with all the other bidders that you’ll only bid once. 3) If your client drops out, tell all the other bidders what his bid was. 4) Blackball agents who run bad auctions. 5) Set up a website with your estimate of fair market value for properties that are listed low. You might have to password protect it to avoid charges of unauthorized advertising.

    A huge problem is that winning the bidding war sometimes benefits the winner, but ALWAYS benefits the winning agent. He gets more money faster with no more driving his clients around, and the local comps are set that much higher, which benefits all agents working in the area. Commonly heard from agents: “That’s not a valid comp, it was a foreclosure.” Not commonly heard: “Not a valid comp, it was a bidding war that spiralled out of control.”

    So any theories on why there’s so little inventory for livable SFH? I’m of the opinion that recent price rises without wage increases have trapped a number of people in homes they couldn’t currently afford, so they certainly can’t afford to move up. Meaning the only homes that come on the market in that segment are from death/divorce/relocation. Could make a good blog entry.

    1. jeff316

      at 10:55 am

      Suggestion 1 is fine as long as the client is okay with losing, suggestion 2 and 3 are ideal but might be unrealistic (and may put your client at a competitive disadvantage, with number 3 possibly contravening a BRA? Maybe David would know more on that.)

      Suggestions 4, and 5 are great though, particularly 5. That would give a buyers agent a huge competitive advantage and selling point for future customers. That’s a great idea and probably can be done with some formulas using previous local sales.

      I still think the issue of multiple-bid scenarios is one of laziness. Lazy selling agents dont’ want to be accountable for their pricing and therefore avoid the work/risk involved with proper pricing – and lazy buying agents that don’t want to do the work of adjusting their clients’ pricing expectations. Unfortunately, laziness is difficult to eradicate.

  4. Joe Q.

    at 9:35 am

    Garth Turner is great at bombast (I think he fancies himself a James Howard Kunstler type) but he tends to cover the same topics over and over again. Once you’ve read 6-7 of his posts, you’ve read them all. And although I’m general quite bearish on housing, I agree with you that “predicting” a crash is a futile endeavour and this has really hurt his credibility (pointing out areas of over-valuation or disconnection from fundamentals is another story).

    That said, amidst the doom-and-gloom prophecies there is a lot of good advice that Turner’s more strident critics seem to ignore. He writes frequently and quite sensibly about budgeting, asset allocation, and the need to adequately prepare for retirement. The phenomenon of people reaching retirement with insufficient savings, or of taking on lots of debt (often housing-related) in their 50s or 60s, is one that he calls out quite frequently, and rightly so IMO. So there’s quite a bit of “signal” among the “noise”.

    1. Kyle

      at 2:06 pm

      You may call it “bombast”, but Garth’s language is a classic example of language designed to instill “confidence” in him (despite a track record that is anything but confidence inspiring). You know who else uses language like that? Confidence men, or con men for short.

      1. Ralph Cramdown

        at 4:48 pm

        But what’s the con? From my limited review, the guy espouses holding a balanced portfolio, lighter on real estate and heavier on income producing securities than is typical. He says that the demographic curve suggests that there’s going to be more sellers than buyers in the near future. Which bit do you disagree with?

        1. Kyle

          at 10:09 pm

          He is the definition of a snake oil salesman (isn’t it ironic how he throws that term around on his blog). Even though i know absolutely nothing about yoga or medicine, it would be like me creating a dvd of yoga moves and then hiring really great copywriters to help me market my dvd as yoga that WILL cure cancer, or yoga that WILL cure infertility. With the right language and a few nuggets of obvious wisdom thrown in, desperate people will buy it. Not because my yoga moves work, and not for those few nuggets of wisodm. They will buy it because all they have left is hope. Would you not consider this to be a fraud or a con? The only difference between my yoga example and what Garth does to people who want so badly to own a home that they can’t afford, is that i will undoubtedly have better success at curing cancer or infertility (even just by random luck) than he has had with making correct predictions.

          He knowingly misrepresents the truth to sell false hopes to the hopeless. Which is disgusting on a human level, and in my books makes him the type of scum bag that makes regular scum bags look classy.

          1. Joe Q.

            at 10:17 am

            I would be more inclined to believe the “con man” or “snake oil salesman” epithets if there was evidence that Turner is reaping some kind of immense profit from his operation.

          2. Kyle

            at 12:57 pm

            Not sure i understand what difference it makes, if he made $1 or $1M? The ethicacy of a fraud should not be dependent on how successful it is.

        2. Kyle

          at 10:25 pm

          His demographic curve hypothesis is just the latest in his long line of failed attempts to justify why real estate is going to crash by the end of the year. Let me just give a chronology of Garth’s epic fails:

          The US crashed, therefore houses in Canada WILL crash by the end of the year
          We’re going into deflation and interest rates will rise, therefore houses WILL crash by the end of the year
          We’re going into inflation and interest rates will rise , therefore houses WILL crash by the end of the year
          Gold is going to crash and oil is going to $250/barrel, therefore houses WILL crash by the end of the year
          The government has tightened mortgage rules, therefore houses WILL crash by the end of the year
          There’s been an increase in foreign buyers, therefore houses WILL crash by the end of the year

          So after being wrong for over half a decade he’s changing his tune:
          Boomers will move to retirement homes or die, therefore houses WILL crash….soon.

      2. Devore

        at 10:28 pm

        There’s no con. And his other market calls (bonds, equities, commodities) have been pretty darn good. The problem is, of course as you note, that he makes those only around inflection points, but he writes about real estate nearly every day. As such, he’s always calling for real estate to crash, fall, tumble, dip and swoon. You can’t predict irrational behaviour, and certainly not its timing, which will sink you every time. The key to value investing (ie looking at fundamentals) is to keep your head down. Running a daily blog is contrary to this goal.

  5. Ian

    at 9:46 am

    Your twitter feed led me to expect something *really* controversial. But all of this is standard and familiar (and welcome) David Fleming.

    David, you write this like you have something to prove to anybody. Nobody who has read your blog for more than a few months, or even a few weeks, doesn’t know that Garth Turner simply embarrassed and discredited himself by slandering you as an “unethical”, “greedy” “shill” who “dupe[s] wannabe buyers”. He made it obvious that he simply hasn’t read, or fairly read in context, a single word you’ve ever written on this or any other subject.

    Your response does you much credit. Mr. Turner seems intent on creating a personal rift and alienating one of the few realtors in the industry that has proven himself to be squarely on his side on this issue, and many other other significant issues relating to ethics of the Realtor profession, seemingly based on a perceived slight arising from your reasonable disagreement on another issue. It’s refreshing to see that you’re not taking the bait, but remaining rationally consistent about what you agree and disagree with Mr. Turner.

    I’m writing this as I bitterly cry and laugh maniacally at the market I’m in right now. This month is *INSANE*. Three east-end houses (two in the Coxwell/Danforth area and one in Leslieville), listed at $549K, $589K and $589K respectively, each sold this week for $627K, $662K and $680K respectively.

    Screw this. I’m going to find a shack to live in.

    1. David Fleming

      at 12:13 pm

      @ Ian

      Even one of my friends emailed, “BOOOOOOO. Your post was way too tame! Damn you and your high road.”

      I guess I take the honest, rational, and realistic road, while maintaining my fun-loving side, ie. a quick photo shop of Garth and I holding hands.

  6. Pen

    at 10:52 am

    Hi David.

    Apparently one can legally reject a $620,000 bid and list at $590,000 since the act of advertising a property for sale is an invitation to treat – an open invitation to submit a bid rather than a seller’s offer to any one party. I can certainly understand since acceptance by a seller of their property’s sale is not solely based on offer price as it may include numerous other considerations acceptable to the seller. If for example an offer 20% above asking is tendered but the buyer wants to close a year hence, or a vendor take back, or an inspection condition that requires the seller to cover the first $15,000 of deficiencies, there is no reason why the seller must then re-list higher than the offered price.

    My understanding is that even in an auction an offer need not be accepted unless it gives mention to a reserve bid.

    For reference you can find this listing price question and answer in OREA’s legal corner under Offers/Accepted and unaccepted offers – March 12, 2012.

    I agree though that it would be unethical of the REALTOR and seller if the seller is playing games but that is tough to discern.

    1. David Fleming

      at 12:16 pm

      @ Pen

      And therein lies the problem!

      My manager told me the same thing: “If you turn down $620,000 on $599,000, perhaps other terms/conditions were not acceptable, and thus it doesn’t constitute false advertising. Maybe the closing date was not acceptable, for example.”

      But this creates a grey area that can envelope the entire process.

      What if every single possible imaginable term or condition of the offer was satisfied, BUT, the offer itself did not smell of fresh watermelon as per the seller’s instruction/wishes?

      All it takes is for a seller to say, “My conditions weren’t satisfied,” and they’re off the hook. Now they can continue to advertise falsely. Great world we live in…

      1. Pen

        at 2:17 pm

        David, you know as well as all others in this business that ‘what ifs’ abound – from the seller who wonders if they settled for too little to the buyer who wonders if they paid too much. The unethical situation you describe could and probably does happen although I surmise rarely since it often backfires on the seller who turned down a great offer, only to have to reapproach the buyer later on looking like a fool.

        Like you, I am not a fan of underlisting a property because it’s proven time and again that pricing at MV can and will generate over-asking bids – especially in a seller’s market. Some consumers are under the wrong impression that REALTORS set the price and terms when in fact that is the sole decision of the seller and as long as the legal system considers the act of advertising a property for sale as an invitation to treat and, affords sellers the rights under same, or forces them to disclose the contents of all offers, then there is nothing that can be done about the practise of rejecting any or all offers. On the contra side, buyers do have their day and the upper hand in a buyer’s market.

        In the name of fairness would buyers and sellers not be better served if they knew what the final listing commission was on all comparable sales as well as for the listed properties as opposed to wondering if a seller accepted or rejected an offer unethically?

      2. Chris McKee

        at 1:41 pm

        A buyer can tie up a property, then on a whim such as, “I don’t “agree” with the condo rules”, back out of the contract, all deposit monies (if there were any), returned. So where’s the repercussions there? Were they not falsely implying they were serious about buying the property? When in fact they just got cold feet and wanted out. Happens all the time. What a great world we live in…….

  7. Kyle

    at 1:00 pm

    Garth is not one to talk about ethics. Of course he forgets to mention that he used to collect advertising dollars from Real Estate developers, when he was a real estate pumper, with his own TV show called Real Estate Television. It’s funny how he has nothing but bile at today’s media outlets for doing the exact same thing he did then.

    He is also basically getting rich off of the same racket as Jo Jo’s psychic network – telling desperate people what they want to hear. Only difference is that instead of charging $4.99 a minute he charges $20 per book and god knows how much for his speaking engagements. He knows his lemmings won’t question his blatant misrepresentation of facts, the gaping holes in his arguments or his 6 years of being utterly wrong on absolutely every prediction he has ever made. He knows the cheques from his publisher will keep rolling in, as long as he keeps feeding his lemmings’ fasntasies that they can some day soon have what they can’t actually afford. I actually think what he’s doing is way closer to fraud than anything that happens in Real Estate.

    And i wonder what he tells all those peeple who sold their houses on his advice since 2008? Oh i know, probably something like this, “Sorry, you missed out on four years of impressive gains my timing may have been a little off, but thanks for buying my book and why don’t you come to my seminar next week where you can listen to me make more worthless predictions”.

    1. Kath

      at 10:17 pm

      Get your facts straight before you post. Garth’s seminars are FREE. RE is a license to steal. Doctors don’t make as much and they save lives. You will defend this manipulation till you die of course, after all your paycheck depends on it (assuming you are an agent). And who are you calling desperate? Take a look at all those who drive 10km out of their way to save 2 cents on gas because they just signed up for $800K 30yr mortgage and make less than $100K a year.

      1. Kyle

        at 12:04 pm

        My paycheque has absolutely nothing to do with real estate. Do yourself a favour and ask yourself honestly. Do you believe in Garth, because he has proven to be right and astute, or is it really that his message soothes your disillusionment? If it is the latter, perhaps you should really step back and consider who is the real sheeple, and who is really drinking the kool aid.

  8. renters rule

    at 9:43 pm

    Real estate prices in Canada are not sustainable, it is NOT different here and those foolish enough to jump in with marginl financial ability to actually handle the costs, are putting themselves in a debtors prison, for DECADES TO COME.

    And for what? So that realtors can make their ridiculous commissions and mortgage brokers can make a few bucks doing deals. Demographic forces are a tsunami: our population is aging and hovering at near zero growth levels (even with “hordes” of immigrants). Housing here IS going to go into a 15-20 year downturn. No ifs ands or buts about it. The manipulation of the press by the RE industry to create the illusion of a on-going hot RE is so bogus as to be very very sad.

    The RE market in Canada, even in Van and T.O., is toast. What has been happening for more than a year now in Victoria and Kelowna, and more than 2 years in places like Calgary and Whistler is coming to the rest of the country.

    A RE license does not make you an economist; just a parasite. One of these days the government will remove your industry’s ability to deprive the public of the details realted to RE transactions. You are dinosaur snake oil salesmen. Hope you have a career backup plan.

    1. landlords rule

      at 10:28 pm

      Keep buying Garth’s books. I love my rent cheques!

    2. Greg

      at 12:00 pm

      Keep on dreaming, loser. Things are not going to happen because you wish for it to happen. You can wait for a crash to happen but in the mean time, you’re living under my commands, you work like a slave to pay off my house and you would get booted out at a moment’s notice if I no longer want your sorry ass around. Wouldn’t this be enough of a motivation for you to work harder to own a little something instead of sitting there wishing for a crash? What a pathetic loser!

      1. Greg

        at 12:08 pm

        Sorry David for being brutally honest with this loser renter. My realtor is amongst the most hardworking people I have ever known. For this loser renter to be calling the whole profession “parasite” out of frustration because he cannot afford to own a home is totally unacceptable.

        1. jeff316

          at 12:30 pm

          Re: the parasite and overpaid comments, part of it is a legit gripe with the buyer’s agent compensation (in my view.) But more than that is the new ‘everybody is overpaid…except for me” attitude that seems to be prevalent these days. Which is ridiculous.

          Agents get flack for not needing a tonne of qualifications, and therefore in the minds of many they are overpaid. Ok, but how many times have we heard people get flack for being well-paid because of their qualifications? The gripe that a whack of letters behind your name indicating that you’ve jumped through a bunch of hoops shouldn’t euqate to a good payday for all? There’s that one too.

          And then there’s the complaint about people who get paid above average for doing really undesirable jobs that don’t take much skill or talent, like our garbageworkers or cleaners? Or gripes about how much tradespeople make, since let’s be honest most plumbing and electrical isn’t rocket science?

          If you ask me, being an agent is a really crappy job – working evenings, nights, weekdays, weekends, holidays for fickle customers that don’t guarantee you a paycheque, in a field where your income isn’t secure, isn’t consistent or predictable, where your’e at the whim of wild market swings, where competition is cut-throat and everyone thinks you’re a snake and even when you’re successful you still have to fork over a percentage of what you make to your brokerage.

          So let’s recap – having no qualifications shouldn’t result in good pay, having qualifications shouldn’t result in good pay, having a crappy undesirable job shouldn’t result in good pay, having a skill or trade shouldn’t result in good pay, working evenings and weekends shouldn’t equal good pay…everyone is overpaid no matter what when and where.

          It’s as if no one has a right to make a good living at anything. It’s so stupid.

          Rant over. 🙂

  9. leadfoot

    at 10:06 pm

    Garth rocks.

    You suck.

  10. disciple

    at 10:08 pm

    You punk! Answering with “it’s always been done that way” doesn’t refute the cold, hard logic that what you are engaged in is fraud. You must deal with the truth by avoiding mirrors?

  11. gene

    at 10:55 pm

    The problem with bidding “wars” are that they aren’t set-up even as an auction… What I can tell you, is if the next house I want to buy has a bidding war, i can guarantee you I will tell my agent to inform the other bidders of what my bid is. I have heard too many times that someone comes in way above the next closest amount, and I find that despicable, unethical and self serving. If realtors want to gain some respect, stop with the commission structure as a first step, and go toward a flat fee.

    I don’t know any profession at all, where putting up a sign and an inability to spell on advertising (see many of the MLS listings) is entitled to an average pay out of say 2%-2.5% of $800000 in Toronto. Honestly, get with the times and be creative. The music, movie, travel, restaurant, etc., businesses are allowing their customers WITH THEIR SUPPORT, to become more effective and independent in the process.

    If you want to be one of the best realtors in the city, David, start to be fair, honest, ethical and fiscally responsible, because for the love of god, your fee has absolutely nothing to do with any indemnity. Can a realtor be sued for negligence??? kinda, but not really.

    My true problem is with myself, as I am a strong believer that a house is worth what it sells for, but in Toronto, Im really having a hard time to believe it, as I just sold my 2 bedroom house in midtown toronto for $900k. It’s nice, but honestly, $900k to two 30 year olds who are wanted a house in the area, and are now stuck with a $700K mortgage (let alone what they had to do to come up with $200k++ as a downpayment).

    1. jeff316

      at 8:20 pm

      What I don’t understand is why it’s always someone else’s fault when it is buyers making bids and sellers agreeing on the listing prices.

      1. emmi

        at 11:04 am

        It is someone else’s fault that so much credit is being extended. And every taxpayer in canada, including the suckers/renters are covering the backside risk which is causing so much credit to be extended.

        It’s not a housing bubble. It’s a credit bubble. The leverage makes the credit bubble show up most forcefully in house prices.

        (and I don’t read garth, but thanks for the accusation ahead of time.)

        1. jeff316

          at 12:43 pm

          Is someone forcing private lending institutions to lend to borrowers?

          Is someone forcing borrowers to lend this money?

          Is someone forcing borrowers that lend this money to spend all they can get their hands on?

          Is someone forcing people to bid above asking on properties?

          The answer to all of these is no. We are the voters who elect governmens that set policy. We are the consumers whose habits, preferences and consumption trends drive market demand. We are the borrowers that borrow money. We are the sellers and the buyers that make the bids and close the transactions. We are to blame.

    2. jeff316

      at 8:34 pm

      “I have heard too many times that someone comes in way above the next closest amount, and I find that despicable, unethical and self serving.”

      Why? If they’re not comfortable with that price, then they shouldn’t have bid it. If you truly find all of this so despicable, and truly wonder whether your 2-bedroom house at 900 000$ was ‘fair’ value, maybe you should have sold it for 700 or 600 000$ instead?

      And how will an open auction make anything better with regard to your complaints? It won’t. Open bids guarantee that the bidding will end up pricing up the house to it’s maximum cost. Why would we want to import a system that is, in part, fueling the most over-heated housing market down-under?

      All this outrage over bidding wars is about emotion and deflection. People are mad. There is limited supply, lots of demand and the downpayment rules and interest rates of the day facilitate more competition. People are mad and want someone to blame, but they only people they can truly blame with any accuracy are themselves – they’re the ones electing the politicians, setting the prices, and making the bids.

      1. David Fleming

        at 8:54 pm

        @ Jeff

        I agree.

        “All this outrage over bidding wars is about emotion and deflection. People are mad.”

        You’re absolutely right, since they can’t blame themselves, they have to blame somebody else. You know I read all the comments on this blog because I have to moderate them one at a time. I may not respond to the stupid ones, but I still read them, and it’s apparent when somebody with the handle “Renters Rule” posts something about evil Realtors that this person has clearly made a personal choice to rent, and thinks that housing prices are going to crash to a point when he or she can get back into the market. If the market doesn’t crash, or doesn’t crash fast enough, this person is angry, and takes it out on realtors, lawywers, lending institutions, Bank of Canada, and everybody else involved – but most of all, Realtors.

        There are a lot of things I would change about our system of presentation and evaluation of mulitple offers, but nothing will ever remove CHOICE from the equation; that is, the buyer always has the choice of making an offer, or not.

    3. Chris McKee

      at 1:46 pm

      Gene, if the business is so easy as you suggest and seem to know, I cannot for the life of me figure why you are not out there doing it? With all the “free & easy” money you’d be earning, you could become a philanthropist. Or better yet, only accept $700K the next time someone offers you $900K. Now were talking about a true ethical person as you seem to be implying you are.

  12. renters rule

    at 9:54 pm

    HAH

    The first fundamental error of all realtors, you guys think that everyone WANTS to own! You assume I am angry, not at all, just think that realtors are generally slimey and unethical (in heated markets, some of the lifers I am sure are probably not that bad, you do however have a ton of riffraff in your, ahem, “profession”).

    News flash sherlock, regarding owning, been there done that. I rent as a choice, given all other factors in the equation (the biggest one being that owning costs 3 times more than renting in my city).

    Owning is only one option. There is nothing wrong with renting, although realtors do their best to make greater fools believe they have to get in or else…. well, be priced out forever of course! Ridiculous. You know the markets are already correcting….that is why you have a blog, post on Garth, etc. Damage control, good luck with that! This discussion about bidding wars is hysterical… ask people in Richmond what they think about biddng wars, they are more temporary than a leafs lead in a hockey game. You can tell the market has topped when there ARE bidding wars.

    Anyone who ends up in negative equity on their house better not expect me or any of the other RESPONSIBLE canadians out there to bail out them or CMHC. Never going to happen.

    1. Pen

      at 10:52 am

      You are angry! Were you not you as a renter wouldn’t care what manner of negotiation tactic buyers and sellers freely choose to engage in. Rants like yours, hello goodbye et al drip with envy and the underlying sense that a) you either cannot afford to purchase a house or b) you cannot compete.

      It’s not really the REALTORS with whom you’re angry either it’s the sellers and buyers because while you look to use REALTORS as the scapegoats for bidding wars, they in fact have no power of attorney, no right to decide what a seller will accept nor what buyers will or will not pay. REALTORS do not sign on the seller’s line, nor do they sign on the buyer’s line. And since I know you’re now screaming a rant at your monitor: ‘yeah but they tell them what to pay and accept’, what you’re really doing is accusing buyers and sellers as being idiots for not having minds of their own.

      That’s the indisputable truth behind your rants,renter. So when can we expect you, Garth and the like minded to turn your disdain toward those you’re really pissed at – the buying and selling public and call them unethical, slimy and fraudsters for engaging in bidding wars?

      Someone like you might be excused for calling the legally accepted process of a buyer and seller freely negotiating between themselves unethical only because you choose to be ignorant of the rights of free market afforded Canadians. But The Greater Fool himself – Garth, has none whatsoever to be calling it either unethical or illegal, fraudulent or otherwise for he, as a past politician, has no excuse for not knowing the difference between an invitation to treat and a fraudulent practice.

      One last thing about this: “You can tell the market has topped when there ARE bidding wars.” Every year since 1996 has produced higher prices over the last and bidding wars have been ongoing for a good 7 of those.

      1. jeff316

        at 12:46 pm

        Exactly. (I’m neither a lover or hater of real estate agents. I think that the compensation formula for buyers’ agents needs to be overhauled. But the spinning the wheel of blame and always stopping the wheel when it lands on real estate agents is ridiculous and one hundred percent phoney.)

  13. Hello Goodbye

    at 11:31 pm

    How is Garth Turner’s message of “having a balanced portfolio of assets (including a certain % of real estate)” the same thing as ‘selling snake oil’???

    I agree that the guy knows how to skew the message and take snippets of a certain article to prove a point — like he did with David’s bidding war comments — but that doesn’t mean that his words are untrue or unethical. I’ve never heard of anyone saying that “don’t have all your eggs in one basket” is a lie or somehow misleading?

    Also – aside from Garth’s occasional book and his Financial Advisor business (that isn’t even advertised on the greaterfool blog), what exactly is the benefit to him? He does come across as a bit of an infomercial personality at times, but it’s not like he’s Oliver “I BUY YOUR JEWELRY” or Mr. Slap Chop.

    I agree with the other commenters here that have called out the “every’s doing it” defense from David. To me, that’s basically admitting that bidding wars are unethical, and Garth’s overall message was accurate (and David was just the untimely example of a realtor talking about bidding wars, which got picked up on the daily blog entry).

    Unfornuately, the “everyone’s doing it” defense on bidding wars is why the profile/sterotype of a successful realtor in many people’s eyes is heading down towards used car salesmen and telemarketers. The more the industry is dominated by scammers, the worse it will be for everyone.

    1. Kyle

      at 11:59 am

      I have no problem with his “balanced portfolio” message. I fully agree with that. When i refer to him as a snake oil salesman, i am talking about him saying utterly untrue things (a few random examples below) which comprise the vast majority of his weblog’s content:

      “As the year ends, there’s no satisfaction seeing my predictions materialize, because we’re entering a real estate-based collapse just as middle America did. And it will get far worse in 2009.” – Dec 30, 2009

      “We continue to run roughly two years behind the Americans in this real estate saga. There is no escape.” – June 2009

      “Sales declines in 2010. Check. Price declines in 2011. Coming. How fast and how deep will depend on the psychology of the flighty masses we live among.” – Dec 29, 2010

      “Let’s get back to real estate. We’ll do this for two reasons. First, houses are about to enter a new phase in which buyers in almost every market of the country get the upper hand.” – Dec 28, 2011

      1. Hello Goodbye

        at 12:57 pm

        How is a prediction that doesn’t materialize the same thing as a lie?

        Also – how is a forecast/prediction from December 28th 2011 “untrue”? It’s not like the Real Estate Market would ever be able to change significantly in just 3-4 months.

        Using your criteria, almost every single person in Financial Services is a giant liar, because economic conditions are constantly changing.

        1. jeff316

          at 2:03 pm

          There is a difference between an incorrect prediction and selling someone a line for your own purposes, which Garth does.

          I’m no real estate bull but when someone is wrong about…

          a) when something is going to happen
          b) why that something is going to happen, and
          c) if that something is even going to happen in the first place

          …and they are wrong consistently, constantly, over and over and over, despite ample evidence to the contrary and an increasingly spotty track record, and they publicly trash those that disagree, and they continue this mantra and it is quoted and written about and published over and over for years, yes it becomes a great big lie.

          Garth has taken his stance on real estate not because of objective facts, but because it gets him attention and a group of followers. Which gets him press and money. That makes it a whopper of a lie. Garth is a joke because he’s made himself one.

        2. Kyle

          at 4:06 pm

          They actually have very strict ethical rules and guidelines in the Financial Services Industry that say you can’t present your opinions as facts. Something Garth wantonly does with abandon. True Economists and Advisors, talk about likelihoods and risks to why their predictions may not happen. Garth talks about the crash like it’s a foregone conclusion, and makes himself out to be an Economist, when what he really is, is an author…of fiction.

  14. renters rule

    at 9:22 pm

    Lots of myopic folks on here… I guess all realtors and/or residential RE investors who think the gravy train will never reach a station…… very deluded crowd here.

    My tax dollars will never be used to bail you greedy little guppies out.

    Put a fork in it, it’s done!

    Have fun telling each other that residential RE only goes up…. ba-bye

    1. landlords rule

      at 4:29 pm

      And you have fun watching others get wealthy from the sidelines. Just remember don’t bounce my rent cheque or it’ll be ba-bye to you!

      1. dave

        at 9:42 am

        Two points,

        First, real estate is well documented as the worst performing asset class over long term. Sure, you can pick a selective time frame such as the last 15 years in Toronto when it has performed very well. But even within that time frame, consider that since 2009 Toronto RE has been substantially outperformed by equities, bonds, gold and oil.

        Second, if you think you can evict a renter after a single bounced cheque then either you are not a landord, or a very naive one.

        1. David Fleming

          at 12:44 pm

          @ dave

          Did you read “The Ascent of Money” by Niall Ferguson?

          1. dave

            at 10:56 am

            Yes, an excellent book (and video series)

          2. Joe Q.

            at 11:10 am

            The message of that book, as far as I could tell, was that housing roughly tracks inflation over the long term, through it does go through boom and bust cycles.

            Ferguson also does a great job of illustrating what happens when governments intervene in mortgage markets to promote home ownership.

        2. Kyle

          at 1:31 pm

          “well documented as the worst performing asset class over long term”

          The above quote is pure unsubstantiated rubbish pulled out of one’s orifice. There are just as many if not more well documented cases of various forms of Real Estate out-performing all other asset classes. But at the end of the day, comparing real estate to other investments is beyond pointless. If you aren’t including your cost of rent for the exact same property and tax on income and gains in the return of the other asset classes then your results are just plain wrong.

          1. dave

            at 10:55 am

            Here is a comprehensive report on the topic from Deutsche Bank, and it will be very difficult for you to produce a credible report in support of your claim that RE outperforms all other asset classes.
            http://www.etf.db.com/UK/pdf/EN/research/researchfixedincome_2010_09_13.pdf

            The relevant section starts on Page 18, and Chart 14 (on Page 20) quotes the following long term real returns since 1920 in the US.

            6.88% Equities
            3.31% Corp Bonds
            2.62% 10 yr Treasuries
            1.76% Gold
            0.87% Property (price appreciate)

            I don’t understand your points on tax. Tax is charged on RE investments as well as stocks/bonds. If you’re referring to tax exemptions on owner occupied properties, then there would be no rental income (contrary to your post). In the alternate, one would need to consider the tax on your rental income, net of maintenance & property taxes. Similarly, one would need to also evaluate all of the various tax exemptions/considerations for other assets which is beyond the scope of our discussion here.

            Consider this – go online and read the annual report of any major financial institution. Look at the distribution of their assets by class. There is a reason why they invest in equities/bonds/mortgages, but not in property. Learn from those who are professionals in wealth management and aggregation.(ie insurance companies/banks/etc)

          2. Kyle

            at 1:52 pm

            Uh hello, as has been pointed out ad nauseum we are not the US.

  15. Havoc

    at 1:51 am

    Dave you definitely need a part 2 to this post…

    There are a bunch of Garth Turner followers who have been infesting your blog comment section after following the link that Garth posted on his site.

    Get your facts straight u dumbasses….

    No real estate agent, including Dave, has ever come out on this blog and said that real estate values go up and up and only up forever.

    And In all honesty Garth is an idiot, he clearly has never read any of Dave’s posts where he outlines underlying issues with the real estate industry and proposes creative solutions, I.e Pre-construction condo industry, multiple offer process, multiple representation process, etc.

    Instead he paints Dave to be a shady realtor because of the comments he made about underpricing homes to sell above asking price.

    And seriously whats wrong with that? Its a bloody pricing strategy. You price above market value and you wont sell, price at market value and you’ll sell in a reasonable amount of time, price it below market value and you’ll sell in a week with multiple offers to choose from and conditions/terms favorable to you (the seller).

    It’s like an auction and it’s happening everywhere in Toronto and the GTA.

    Dave has consistently pointed out issues with the multiple offer process, which I will not repeat so you can go back and read his fucking posts yourself before posting your dumbass hate comments.

    You’re all idiots for religiously believing in a guy who’s been consistently proven wrong and is consistemly lying to ur face but hey what can I say, even Harold Camping had followers.

    While you continue to rent, your homeboy Garth has Caledan home listed on the MLS for almost a cool million after having bought it for almost half that in 2009. Say whaaa

    1. David Fleming

      at 12:55 pm

      @ Havoc

      Thank you for pointing out what I can’t; something that would be unethical, and breach privacy.

      However, now that you have pointed out that somebody who has been predicting the real estate apocalypse for a decade – who wrote a book about it in 2008, actually purchased a house in 2009, well, then, I suppose we can all draw our own conclusions about his intentions.

      We all have to make a living, right? Even if that means lying through your teeth to sell books and public appearances…

      1. Joe Q.

        at 4:12 pm

        Turner is extremely open about his RE holdings and transactions — he talks about them frequently on his blog. The properties he buys are generally “distressed” or have been sitting on the market for a while. He also repeatedly emphasizes that RE only forms a part of his net worth (maybe 30%).

        His criticisms are aimed at those with no savings who leap into RE as an “all-in” strategy, or who retire (or get close to it) with all of their net worth in RE.

        Again, there is a lot to criticize Turner for, but I can’t see him as guilty of the hypocrisy you’re accusing him of.

    2. Kyle

      at 2:43 pm

      Hmmmm…I wonder when Garth will be removing the link to here from his blog? Can’t let the lemmings see what’s behind the curtain!

    3. Joe Q.

      at 11:06 am

      No real estate agent, including Dave, has ever come out on this blog and said that real estate values go up and up and only up forever.

      I used to live in the Davisville Village area. There was a RE brokerage around the corner from me that used to put up posters in its window during “RRSP season” showing a graph of Toronto average home prices since 2000 with a note about how investing in RRSPs is a money-losing venture, etc.

      So while David has never said that housing only goes up forever, the message that housing is a foolproof investment certainly emanates from some corners of the industry.

  16. Havoc

    at 1:52 am

    Chew on that shit….

    1. dave

      at 11:24 am

      I’ve read Garth Turner’s site since 2008 and his argument is not that owning RE is bad or that one should sell it. Rather he argues in favour of proper diversification dependent upon one’s age/etc.

      His predictions of declines in RE racheted up back in 2008 and were predicated upon the same analysis as Peter Shilling in the US and others which has been subsequently proven correct. The US RE bears (including Shilling) had to endure their own share of ridicule of mistimed predictions, just as Garth has done.

      In fairness to Garth, I think the global QE measures of 2009+ changed the rules of the game. But he has made a number of excellent recommendations on his blog. They include predictions of the rebound of Oil prices, parity for the Canadian dollar, and repeated recommendations of investing in equity markets back in 2009 and 2010.

      Those who have followed Garth’s advise would have made a lot of money since 2008, and certainly a lot more than investing in RE.

      However I’ve noticed a increasing trend on his blog of poorly thought out posts and a disappointing number of cheap shots. Frankly, I think he’s just phoning it in for his daily posts on his blog now.

      And his “quote” of Dave F was entirely out of context and unfair, and I’m disappointed that he didn’t man up and apologize and frankly lost a lot of respect for Garth T because of this. And I agree that his blog attracts more than its fair share of nuts and doomsday theorist (although to his credit he does attempt to distance himself from them as much as possible).

      1. Joe Q.

        at 4:13 pm

        I agree strongly with what dave has written here.

  17. Kenny

    at 9:05 pm

    Hello, I’d just like to add that I don’t think it would be that hard to enforce better practices with multiple offers. You don’t have to monitor all transaction, simply make it that a realtor loses their licenses if they participate in these frauds, and follow through enough that the rest fall in line.

    I’d also like to see it made that if a places is listed for $X dollars and someone offers $X or greater that the seller can’t back out of the deal, or at least must pay a large fine to do so. Your ‘reserve price’ should be your asking price. Again this would be easy to enforce, a couple of large fines plus a forfeit of any gains over the original asking price would quickly make the evening news. Provide part of the fine as a bonus to any realtor that reports it.

    Bidding wars could still happen, but sellers would have to decide if it was worth risking getting less for their property.

    1. Havoc

      at 9:28 pm

      It’s a lot easier than it sounds…

      At the end of the day a seller doesn’t have to accept an offer even if the dollar amount is above asking the asking price, because PRICE is only one of the items being negotiated.

      Closing date, conditions, inclusions and exclusions all play a major role in a seller’s final decision as to whether he/she will accept, counter or reject the offer in front of them.

      It is part of a Realtors duties to make a RECOMMENDATION for the listing price prior to listing the place on MLS, the final decision on price once again rests with the seller.

      Realtors have fudiciary duties to clients, one of them is Obedience (meaning do what your clients say) and another one is Lawfulness (make sure what you do obides by the law).

      The word ‘fraud’ is being thrown around like a cheap whore on this blog comment section. If under pricing properties is such a crime then every seller and Realtor whose property sells above asking would be in jail.

      Examples of real estate fraud:
      – falsifying mortgage documents to get loans for underqualified buyers
      – false valuations for appraisals on properties to get more money from the bank
      – intentionally misleading a client when making a purchase
      – concealing the fact from a potential buyer that a home you’re selling has water/termite/mould/drug lab issues
      – oklahoma offers
      – and the list goes on and on and on…

      check reco’s site and you’ll really know what fraud is…

      Saying you should fine a realtor/seller for underpricing and not taking any offer they get above asking price is like saying you should fine everyone who overprices their property and doesn’t take a reasonably price offer at market value – it’s not all about price and just because you want to buy it doesn’t mean the seller has to sell it – EVEN IF ITS ON MLS – It’s an invitation to treat.

  18. Bryan

    at 6:30 pm

    Great blog, David! I found your blog from a link on Garth Turner’s blog. Yesterday I submitted a question to Garth but he censored it and found it to be in violation of his posting rules. This was my question to him:

    “Hi Garth. I heard that you’re listing your house for a million bucks after having bought it in 2009 for only half that. If a crash in real estate was imminent and inevitable just like what you’ve been preaching for the past few years since 2007 (and most adamantly in 2009), then what led you to the decision to buy when you advised everybody else against touching real estate. I’m sure a lot of blog dogs are awaiting your reasoning.”

    My post never made it to the board.

    1. David Fleming

      at 9:27 pm

      @ Bryan

      I publish all comments on my blog, even the ones that bash me personally.

      I don’t profess to be perfect, so why would my blog have only positive comments? Why would anybody’s?

      It would be a shame if Garth or anybody else were to delete comments that don’t fit their purposes.

      I would have loved to see his response to your comment.

  19. kevin

    at 7:03 am

    Like it or not this is what buyers are forced to accept in this frenzy now but the shoe will be on the other foot soon. Garth may have called for a the market to turn prematurely but bubbles cannot be predicted to pop very accurately but don’t think we are any different then the states when greed blinds people into the belief of making fast money then the writing is on the wall. Stay on the sidelines and wait for the coming buyers market. Toronto is going to be awash iin cheap condos within two years and prices should fall by nearly 40% before the decade is out. Canada’s largest ponzi scheme cannot continue. Don’t be the greater fool.

Pick5 is a weekly series comparing and analyzing five residential properties based on price, style, location, and neighbourhood.

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