I really don’t want to sound like a broken record, but, OMG, if I have to utter those words again I think I might scream.
Here is the scenario. An agent recently took out new clients to look at houses. They had built up a nice rapport, spent some quality time together and had a BRA signed. Things were looking good. They found a house they loved. The agent knew it was competitively priced and that there were going to be a few people bidding on the house. He spent the better part of an evening explaining the process, encouraging them to get a home inspection done before offer night, to confirm with their mortgage agent that they had their financing and then showed them some comps to help determine a good price to go it at.
After their very long conversation, the agent headed back to the office to type the offer, then it all went sideways. The buyers wanted to load down their offer with conditions; condition on financing, condition on home inspection and condition on lawyer review of the offer. Oh, and one more thing, after much deliberation, they want to offer $15,000 below the list price. That sound you hear is the screeching of brakes. You and I know this deal is going nowhere fast. The agent calls me looking for encouraging words and the magic spell that will make it all go away. Then I have to say….”well, unfortunately, your clients need to lose this deal so they can understand the process and learn to take your advice “. I HATE those words.
The truth is, new buyers don’t need to lose on any house if they don’t want to. Often their decisions to load down their offer with conditions has more to do with having cold feet. Still, they need to listen to you and THAT means trusting you. Of course you will run into situations where the client is an armchair Realtor who thinks he knows more than you, or you might be unfortunate to work with clients whose father says something like, “are you crazy? you can buy a mansion in Peterborough for the same money”. So what can you do to prevent your manager from uttering those annoying words? Try these five tips.
1. It all comes down to giving the clients accurate information. Show them the numbers (they don’t lie). Provide them recent comps and differences between asking and sale prices.
2. As much as it hurts, you need to be brutally honest about the process. Give them a primer on the market. In case they are new to the city, or have been living under a rock, show them newspaper articles that emphasize what is going on in your local market.
3. Document real life examples of clients that you have worked with or talk about situations where others have lost because they weren’t prepared.
4. Have home inspectors at the ready and explain that the home inspector will save you money by showing you the true condition of the house. It is a needed expense of buying a home.
5. Have some serious dialogue with their mortgage broker. Explain your familiarity with the market. Put their mind at ease that the house you sell them will appraise with ease.
Naturally, there are no guarantees, but a few preventative measures may limit the times you have to lose a deal to prove a point.
mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE
Toronto has a problem. For the past several months, or longer, there has been a shortage of freehold listings in the first-time and move-up markets. You will get different answers depending on who you talk to, but the main culprits include; low-interest rates, the Land Transfer Tax, tighter government regulations and higher consumer debt. The real answer is probably E, all of the above. Unfortunately for buyers the old saying rules…Desperate times call for desperate measures.
Recently one of our agents sold a condo for a young couple anxious to get into the housing market. Their goal was simple; parley their extraordinary talent for decorating and renovating. They did it to their condo and now wanted to do it with a house. Start small and slowly increase their net worth the old-fashioned way…buy a home with good bones, renovate and sell, then buy something bigger and do it all over again. It has been done successfully by many talented individuals over the years. But here is the problem. The couple in question have been watching the market for some time. They have heard the countless stories of wild bidding wars and are now convinced that the only way to win is by working with the listing agent. Their thought is that either they will get it at a lower price or at the very least get the inside advantage at offer night. The example given above should highlight a number of key concerns for both buyers and agents.
First lets look at the process from the buyer’s point of view. You go into an open house and see the home of your dreams. Well, lets clarify… the home of a lot of people’s dreams. So you ask the listing agent to represent you in purchasing the home. Now, aside from the obvious pitfall of asking them to represent both sides of a negotiation, you are signing a buyer representation agreement with the selling agent. It is important to understand what this means, otherwise you could find yourself in a situation where you owe two commissions. More to point however is that jumping from agent to agent will do you more harm than good. The simple fact is that you are hiring an agent to walk you through the process, negotiate on your behalf and in your best interests, keep confidential facts about your motivation to themselves, review competitive properties and help you determine an offering price, arrange and oversee things like home inspections and appraisal visits, and hook you up with contractors or movers and finally, provide a great deal of follow-up service. All these things are tough to do when your agent is also representing the seller especially when there are many people competing for the same home.
There are some basic mechanics about offer night that most buyers don’t know about either. First, if the selling agent is representing you, he must tell other buyer’s agents. He must also disclose if he is lowering commission. The point of this disclosure is to level the playing field for all buyers. That being said, some companies take great pains to ensure a fair and equitable process, so contracting the selling agent just doesn’t make sense if your motivation is to save money.
On the surface, contacting a listing agent seems like a no-brainer, but the reality is that a trusting relationship is the key to a successful home purchase in our competitive market.
Mastermind was a lot of fun this week thanks to a surprise drop in from our Commander-In-Chief Tom Bosley who always brings it up a notch or two. So if you couldn’t make it, you missed an interesting discussion on a classic open house misstep, our duty to disclose, and a spirited conversation about a potential multiple offer bribery.
First off, we heard from an agent who was showing her clients around one Saturday afternoon. She had several properties booked to look at and a few that she didn’t book because they were having open houses. Just after 2pm, they arrived at the first open house. A crowd of people was standing out front waiting to get in, but there was no one at the home. A few minutes later a rather frazzled agent comes screaming up the driveway, jumps out of her car, apologizes profusely, opens the front door then announces to the group to have a look around while she goes and puts out her signs. She jumps back in her car and drives away. Hilarious. Do you think her insurance would cover her if the owners were robbed blind? Honestly, when I hear stories like this I shudder.
Next, we talked about our duty to disclose. So here is the question, you know for a fact that a certain house has a serious flooding problem. While you don’t have a client interested in the property do you think you have a duty to tell the listing agent? What about other agents in your office? Do you owe a duty to them or is it a case of buyer beware? Does your answer change if you have a client interested in the property? It seems clear that if a listing agent gets wind of any defect, he must investigate thoroughly, figure out the extent of the defect and determine a cost to remediate.
Finally, we talked about a very interesting scenario. Imagine two buyers sitting in their car while their agents are inside the house taking turns at the negotiation table. One buyer takes off to the bank machine and returns with $10,000 in cash. He knocks on the other buyer’s car window and offers him the money to rescind his offer. Just to be clear, it didn’t actually happen, but it opened a wild debate at our meeting. The idea is interesting. Buyers are scrambling as hard as ever to win bidding wars but is this a winning strategy? So, the question is, could it actually happen? Do buyers have the ability, outside of their relationship with an agent, to influence other buyers? Thankfully part of our job as real estate agents is to keep the process honest and civil. If you have heard of any stories where something along these lines actually happened, please let me know.
Oh and in case you are wondering, that IS Einstien’s face on my body. Have a great week.