How come discussions about real estate are so negative?
Remember when it wasn’t this way?
I started Toronto Realty Blog in 2007, and there were many differences between then and now. My blogs were about one-third as long, I wrote four times per week instead of the current three, I had a feature called “Listing of the Week,” which was blatant unauthorized advertising and had to be taken down, and oh yeah – most of my posts were positive!
After the last few posts, it occurred to me that the subject matter, the themes, the opinions, and the comments thereafter often take a somewhat negative tone. Why is this?
Is it because real estate is just so damn expensive in Toronto, and people are angry?
Is it because the market is extremely complex, fast-paced, and difficult to understand and thus navigate?
Or am I just a negative person?
The blog-comment I wrote about on Friday is still stuck in my head; the one where a reader told me that if I’m constantly describing interactions with agents who have no idea what they’re doing, and then seem surprised that I have these interactions, then something isn’t right with my expectations.
A lot of my blog topics over the past couple of years have been about organized real estate, and the industry in which we work. I cover a variety of topics on TRB, but every agent out there will talk about new buildings, show pretty pictures of lofts, and re-Tweet the same stats that every other brokerage has on hand, but I pride myself on tackling the tough subject matter, and openly discussing the industry.
Whether it’s commission, multiple representation, access to sold data, the role of TREB and OREA, or the lack of experience of many agents, I have no problem sharing my opinions, even as other agents, and often the boards, ask me not to.
I think that as the pool of licensed agents has grown, the market has become more dynamic, and new brokerage models have popped up, the overall level of service and level of knowledge, experience, skill, and capability of the average agent has dropped significantly.
I wanted to talk today about OREA’s announcement that they, apparently on behalf of Realtors, want the Ontario government to “ban” bully offers, but I’d be remiss if I didn’t describe a recent interaction with an agent that I think will put my above commentary in perspective, and shed some light on the real problem with bully offers.
This story is a short one, but I think it’s a good example of how different people may have drastically different perspectives on the same situation.
Last week, I brought out a condo listing in the downtown core for $599,900.
This was your classic “under list, hold back offer” strategy, and for those of you that believe this to be hypocritical, since I have lamented this strategy on occasion in the past, welcome to the Toronto real estate market! And by the way, it’s the seller’s decision in the end.
Based on comparable sales, this property was probably worth anywhere from $650,000 to $700,000, and while I know that’s an enormous range, you have to consider just how subjective comparable sales can be. Every buyer is looking for something different, and while the average price-per-square-foot in the building over the last six months might lead you to a $650,000 price, there was nothing average about this unit (nor the cleaning, painting, de-cluttering, staging, marketing), nor are 6-month-old comparable sales still valid, in my opinion. I personally believed this property was worth $675,000 to $700,000, and figured we had a good chance of breaking $700,000.
The amount of showings on the property defied expectations. It was just nuts.
We had eight booked on the first day, which is a lot. But we had fourteen booked the second day, and we were pushing forty as we moved into the weekend.
By the time offer night rolled around, we had over fifty showings from agents, and probably sixty to eighty people through the Saturday & Sunday open house.
We were reviewing offers at 7:00pm on Monday evening, and at 10:00am that morning, something odd happened.
I received an offer from an agent with a 1:00pm irrevocable.
I emailed him back and said, “Thanks Jim, but we are reviewing offers at 7:00pm tonight.”
He wrote me back and said, “This is a pre-emptive offer.”
It made no sense to me. And for those of you that don’t understand what pre-emptive of “bully offers” are, let me give my a quick two cents.
If a listing comes onto the market on Tuesday, with offers to be reviewed one week later, and you and your agent see the property on Tuesday night and love it, you might get really aggressive and submit a “bully offer” with incredible terms and conditions, that evening. You essentially put the seller to a test for all their poker chips, and force them to either forego the next week of showings and the open house, and accept the offer right then and there, or turn the offer down, and risk you not coming back to the table on “offer night.”
Bully offers can happen at any time, but they usually happen in the first couple days of the listing.
So boy was I ever surprised to receive a so-called “bully offer” a few hours before my sellers and I had scheduled our offer presentation.
I’ve been in the business for fifteen years, and this was a first. And any time you experience a first in this business, it’s either a stroke of genius, or absolute madness.
I reviewed the offer, and it was a poor one. The price wasn’t great, but more surprisingly, it was conditional. Not just one, but two conditions!
Again, for those of you that aren’t in the know, we are in a market right now where just about every offer accepted on a scheduled “offer night” for a downtown condo is unconditional. Buyers know this, buyer agents know this, and it’s merely a given.
But here I sat, at 10:00am, with a conditional offer, at a price that was far less than any comparable sale would justify, when all the while, I was set to review offers that evening.
It made no sense.
So I called the agent, thinking that perhaps a communication on the phone rather than by email would shed some light on the situation.
“Jim,” I told him. “I have your offer here, thanks for this. The thing is, we’re going to review offers at 7:00pm, as per the listing, as per my email to all the showing agents this morning, and as per my last email to you.”
“I get that,” he said, “But as I told you in my last email, this is a bully offer.”
I knew this wasn’t going anywhere. But I kept it amicable, as I always do, and tried to be honest with the agent on the other end of the line.
“Jim, listen, I appreciate your offer, but my clients are in Jamaica, we’ve got a ton of interest in the condo, and I’ve talked to five or six agents already tonight that have said they’re bringing offers. There’s just no reason for my sellers to work with the deadline you’ve set.”
Somewhat unsurprisingly, he said, “Has the offer been presented to your sellers, and can you provide confirmation?”
I didn’t understand. He was trying to strong-arm when he had absolutely zero leverage.
So I changed my tune a little, offering a little more honesty: “Jim, you’ve submitted a conditional offer; an offer with not one, but two conditions, for a price that won’t work, on the day of offers, with a deadline of six hours before multiple other agents are going to submit offers.”
He asked again, “So has the offer been presented to the sellers, and can you confirm so?”
“Oh, Jim,” I said, “I think the conversation with my sellers would go something like, ‘Hi Guys, we have, for some reason, received a conditional offer for $635,000, expiring at 1pm. Let’s reject this offer and move forward with the plans tonight.’ That’s how the conversation would go, Jim. So yes, I can get you receipt if you would like.”
Then he started to rant and blame. “This is bullshit,” he said. “This bully offer nonsense. It’s ridiculous. I’ve tried to get the boards to stop this, it’s bullshit….”
He went on an absolute tear, and I pleaded, “Jim, Jim, can I get a word? Jim?”
I asked, “Jim, can you give me fifteen seconds, please?” And he calmed down and allowed for it.
“Jim, I looked you up online,” I said. “You’ve got thirty years in the business.”
“That’s right,” he said, “I do. I’ve been in the business thirty years, and this is all bullshit, this crap going on now…”
I continued, “Jim, I respect that you’re a real professional, you’ve been in the business since I was in grade-school, just please hear me out. Jim, you submitted a conditional offer to us, with a gun to our head. Please, Jim, put yourself in the sellers shoes. They’re going to have five, six, or ten offers tonight. Why would they accept a conditional offer at a price, that, with all due respect, is so far off base, and forego working with the other offers this evening? This is the market we’re in, Jim. A bully offer doesn’t have conditions, it just doesn’t. It’s not how this works, and I’m trying to help you here, Jim. I’m giving you information that you can use, and take back to your client.”
That made perfect sense to me, and it was the information he needed, from the perspective that he was missing.
But he went on another rant, and then said “Goodbye.”
7pm came and went, and we had a high offer of $703,000, which was fantastic. There were three other offers at $681,000 and above, then two in the middle somewhere, and then Jim and another agent at the bottom. To his credit, Jim did remove the conditions, but the 4-month closing was somewhat odd, as was the low deposit.
We accepted the highest offer, which was unconditional, with a deposit cheque in hand, and my sellers celebrated in Jamaica.
I called some of the agents to let them know that we appreciated their offers, but we wouldn’t be working with their offers tonight. Others I emailed, one of which, was Jim.
Jim responded and said, “Well, I’m sure you sold the property with no conditions and you probably have a cheque,” with this undertone that somehow this was not a good thing, and then said, “Can I get the sale price?”
So I told him.
And then he wrote back, “Wow, the sellers won a lottery. I have been trying to get boards to eliminate offers dates as it inflates the prices and affects the economy. Hopefully they will wake up and realize what it is doing to our industry.”
And that was that.
I didn’t write back because I didn’t feel there was anything left to say.
So what do you make of this, folks?
I think we’re all going to have different opinions, but there are really only two perspectives on this.
Personally, I think that this agent, with 30+ years in the business, has lost his edge. He is utterly and completely out of touch with the market. He doesn’t know how to transact, doesn’t understand the market dynamics, is lost when it comes to the offer process, and has let emotion take over.
An experienced agent is supposed to take the emotion out of the process for the buyer, so that the buyer can keep a cool head, and focus. In this case, the agent was the emotional party.
The agent didn’t run his comparables, and seemed to suffer from the same affliction as many buyers, who feel as though their dream price has a chance in reality.
The agent was confrontational and aggressive when he was in the submissive position.
And in the end, he got in his buyer’s way. This was not a case of an agent protecting a buyer, or looking out for the buyer’s interest; this was an out-of-touch agent who put his own emotions and ego first and foremost.
And in the end, he blamed other agents, other buyers, real estate boards, and just about everybody in between, but never looked at himself in the process.
Or, maybe he’s right about everything.
Maybe the other perspective on this carries weight.
What if he’s the only one not jumping off the bridge? Just because everybody’s doing it, doesn’t make it right, and maybe the other seven buyers and buyer agents are in the wrong.
Perhaps he’s correct as to how our market has changed, and the industry along with it. “Offer nights” and bully offers? Where did this come from?
With thirty years in the business, having seen ups and downs, maybe his experience is just insurmountable.
Maybe he does know what’s best for the economy, and everybody in it.
Okay, that last one was what “did it” for me.
You all know how I feel, even though I’m trying to make an argument here.
The guy telling me what was best for the economy seemed like a really big reach, and the context was misplaced.
But I will admit that there are a lot of folks out there that will agree with what this guy is saying, and doing.
It’s not going to buy any of his clients a property, and that’s my problem.
It’s childish, to be quite honest.
It’s like when a kid wants McDonald’s for dinner, but his parents tell him that they cooked chicken and rice. So the kid says he’s not hungry, and tries to “show them” by not eating. The parents say, “fine,” and the kid goes to bed without dinner. How long until that kid realizes just how hungry he is?
Despite the dislike for “offer nights” in Toronto, they are a necessity, based on supply and demand. I refuse to accept otherwise, and I refuse to accept a contrarian opinion from anybody that does not own a home, since it goes without saying that all buyers would love to see the supply and demand dynamic change.
Despite the dislike for “bully offers,” they are a part of our market – for how long, who knows.
But an agent putting his head in the clouds and trying to stay there and work out a deal for his buyer is n-e-v-e-r going to work in this market.
That’s just my perspective…