As a manager for a busy downtown Toronto real estate office, I never thought I would be spending my time talking agents off the edge of a cliff. The truth is, that the market is breaking new ground on agent management. In the past, my conversations with fellow agents revolved around helping them write clauses, dealing with complaints, running meetings, being a liaison with front desk workers, reviewing advertising and generally ensure their business was running smoothly. Today I’m still doing those tasks but as an unfortunate byproduct of this market, I find myself spending a lot of time comforting agents, offering condolences and talking through the ‘post offer’ game tapes. Don’t get me wrong, these are great conversations, but I worry about an office full of stressed out and exhausted agents.
Now, you might be thinking…boo hoo, poor agents, they make so much money it’s hard to have any sympathy. The reality is that the buying process is seriously intense these days. Frustration levels amongst agents are extremely high. They are missing out on offers on both condos and houses and our office meetings and masterminds are dominated by countless stories of failed offer attempts despite clients throwing everything they have at a property.
The problems of low supply, as reported in the media, are not limited to the downtown core either. This is a Golden Horseshoe problem, from Hamilton to Ajax and as far north as Barrie. Granted, the supply crisis is highest in the 416. For several years I have been tracking the weekly sales of houses and condos in the downtown market, defined by the area between the 401 and the lake and east to include the Beaches and west to include High Park. Over the years I have watched the general trend of tightened supply in both houses and condos as well as an increase in the percentage of properties selling over the list price. While housing has stayed relatively consistent, only edging up slowly, the condo market has often surprised me. When I first started tracking sales, there was only true competition on about 13-15% of units sold. That percentage was pretty stable for a few years. Then the number started to shift. By mid year 2016 I started to see more units selling at or above the list price. By June we started to see 30%, by October we were testing out 40% and by December we were seeing some numbers in the 50% range. Imagine, half of all condos selling above the list price. In January 2017 new records were set. Last week we hit 65% and when I am reviewing each and every listing on a line by line basis I notice that condos are not selling over the list price by a $5-10,000 like a few years ago, they are selling over the list price by $50-100K now. It is an extraordinary phenomenon.
Freehold homes face the same challenges for buyers. Recently a home in the west end, listed at $799K sold for $999k then, less than a month later a similar home sold for over $1.2M. Everything in an agent’s gut says these houses are worth the same money. So imagine what is happening to those clients who are being told to submit their offer based on a recent sale, only to get completely blown out of the water.
What impact, if any, is filtering down to the agent on the street? Productive agents are feeling the pressure as much as new agents entering the real estate field. I personally find myself spending as much time coaching the newbie agent the art of increasing your odds at the offer table as talking to the experienced agent who is frustrated with market conditions and looking for answers. And it’s not just the shear number of buyers looking for homes that is creating high stress levels. Increased scrutiny by the banks on their borrowers (sometimes insisting on conditional financing clauses), appraisals and quick home inspections are severely complicating the buying process. Are there any quick fixes? Nothing seems evident on the horizon and my impression is that as the spring market approaches it is going to be a whole lot harder before it gets easier.
Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association. The opinions expressed here do not reflect the opinions of TREB, OREA 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.