Mastermind #16 September 14, 2011
You know, the concept of Mastermind was first introduced by Napoleon Hill in his groundbreaking book Think and Grow Rich. He felt that mastermind groups were a powerful way of leveraging the knowledge and skills of the people you work with. The most successful CEOs have used mastermind techniques to grow their companies and in many ways, it is the most efficient training and mentoring program available. So if you missed this week’s Mastermind on Queen West, you missed a great discussion on rules for multiple offers, figuring out holdbacks, and selling condos with high maintenance fees.
In today’s market, good properties generate multiple offers. Full stop. So it is important to set a few ground rules with your client in the event that their home receives more than one offer. Of course there is no hard and fast rules here but our Mastermind group felt that there are ethical methods to keep the process fair. How you deal with multiple offers is really up to the client so it is important to coach them on their options. One choice is to simply take the best offer, even if it wins by $100. The other choice; keep sending them back (a kind of Last Man Standing approach). Either way, the agents bringing in the offers need to know the rules in advance. Let’s say the property receives 6 offers. Two are clearly way out in the lead, separated by a few thousand dollars and pretty much the same terms and conditions. It seems pretty obvious that you are going to be sending them both back, but do you owe an obligation to the other 4 to better their offers? Absolutely. Without giving specific details to the lower 4 offers, you can tell the agents that their offers are not nearly where they need to be however you will give them an opportunity to participate in the next round. Now, what if the property only had two offers? Would you conduct your self any differently? what if one was over asking and the other under?
We talked a little about holdbacks and for the most part, the notion of holdbacks is best left to the lawyers however it is important to understand the complexities involved. A holdback is a dollar amount that the buyer’ lawyer holds in his trust account for the seller until certain outstanding issues are fulfilled. For instance, your client is buying a new condo that has been registered. The taxes have not been assessed yet but the seller was living there for 6 months before he sold it. He hasn’t paid any property taxes yet, but will be responsible for his share when the bills go out. As an agent, you must have enough knowledge of condominium property taxes to advise all parties (including the lawyers). Here is another situation that came up in Mastermind. A house is sold but the day before closing, the upstairs toilet leaks water into the basement. Technically the seller is responsible for the repair, but with no time to do it, the lawyers suggest a holdback of $2000 to have the repairs done. A holdback, arranged through the lawyer with your direction, is way easier than trying to collect from a seller a month from now.
Finally we talked with two agents who are both struggling with the high maintenance fees at two condos. One condo had recently been re-assessed while the other had historically high fees. While the condos were getting adequate showings, no offers where coming in. In following up with agents, the biggest detractor was the fees. Unlikely to change soon, we brainstormed on a few ideas. Obviously the notion of price reductions is an option, but the group thought that perhaps having the owners pay down the maintenance fees for a set time might actually make the properties more attractive. This is something I have seen before. A condo in Yorkville had a special assessment several years ago that nearly doubled the maintenance fee. It made it next to impossible for units to sell ther until someone had the idea of paying the special assessment and relieving the buyer. Smart thinking.
Until next time, have a safe and successful week.