We all know it. In real estate there are differences between clients and customers. We learn these differences very early in our education and training. We talk about fiduciary duties, accounting, fair and honest service etcetera, but the reality is that often those lines get blurred and that puts us into a difficult situation. Case in point. An agent, lets call him Terry, gets a call on one of his listings. The couple want to look at it at 5pm on a Thursday. Terry is not available to show the property so he gives the lead to Fran, an agent in his office who often acts as a buyer agent for him. Fran meets the couple at the condo and shows them around. They spend a long time there and ask Fran a bunch of questions about the property such as, what closing are the sellers looking for, what is included and excluded, and what facilities are in the building. Fran is happy to answer their questions. After a few minutes, it is clear that this couple is very interested in the condo. They start asking more questions about past sales, additional parking costs, maintenance fees and reserve funds. Fran knows the building and answers their questions. Finally the couple tell Fran that they are prepared to make an offer. They want to know why the seller is selling, what the Seller is likely to accept, closing date, and how much commission the seller will be paying and what clauses they should include in their offer. Fran is no dummy. She advises the couple that the property is inline with past sales and is well priced but gives no details into motivation or details into the listing contract.
The couple tell Fran that their lawyer has advised them not to sign a BRA and that they should only enter into a customer agreement. They also feel that it is only fair that since they contacted the Selling agent directly they should only pay 1/2 the commission however they still want Fran to prepare the offer. So here is the crux of the situation. Fran, has treated them, for the most part, like clients. She has provided information and offered advice on the property before establishing what kind of relationship the couple wished to assume. This creates a problem for Fran. If something were to go wrong during the transaction the couple could hold Fran responsible. She has after all put herself into an implied client/buyer relationship. If she knew that the couple wanted only to be customers, her answers on most of the questions would have been much simpler…”Please have your lawyer direct his questions to the Sellers or the Sellers agent”. By doing so, she exonerates herself from any potential question of representation.
As to the comments about commission, the answer again is simple. “My firm has been retained by the sellers to market their property for sale. The details of that contract are confidential and do not impact the sale price”.
It is only human nature to want to help and that desire becomes stronger when there are dollar signs on the other side, but the pitfalls of taking too many assumptions can be equally devastating. The example above highlights the importance of that critical first interaction with a potential buyer who you meet through a direct call or even at an open house. The realities of the Toronto market are that buyers are looking for a price advantage, just don’t let your eagerness to make a deal cloud your judgement.
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.
As we inch closer to the holidays, time with our family and maybe a little vacation, most of us happily put our real estate business on hold. I say most of us but the reality is that real estate stops for no man (or woman). Years ago I remember buying a house for myself on December 23rd. So it brings up an interesting question. Is there any gain in keeping a house listed over the holidays? It was a question that was brought up a few weeks ago at our office Mastermind. Someone, in fact, asked whether the people who kept their homes for sale over the holiday were sending a message of desperation or were agents just to lazy to push the PAUSE button. You can read the initial post here. http://bit.ly/TyKSWq
Ultimately, we wondered what percentage of sellers absolutely needed to sell their homes. The answers from the group ranged from 10% to 70%. Much too wide to leave to chance so I enlisted the help of many of the RealtyLab followers to answer a short survey. The results were not all that surprising and, interestingly, confirm the suspicion that Toronto is indeed a city with two markets; Houses and Condos.
First I asked agents to comment, based on their knowledge of the Toronto Real estate market, on what percentage of freehold homes currently listed for sale in the city were being sold by owners who were under pressure to sell quickly. I know this is kind of a vague question but the results were still interesting. Over 41% of respondents felt that between 30-50% of sellers were under pressure, while over 41% of respondents felt that a much higher percentage of condo owners were under the same pressure ( 50-70%).
On why owners were selling, respondents were evenly split with nearly 25% saying their clients were interested in moving up and another 25% saying that their sellers were carrying 2 or more properties. 12% of respondents felt that their clients were simply testing the market while a mere 6% felt that their clients were actively and seriously in a position to accept any reasonable offer.
Next, I asked how long the respondents listings had been on the market. I hoped that this question would shed some light on the two markets but as it turns out, more home listers responded than condo listers so I thought this question had little bearing on the overall survey. But in case you are wondering, 23% of respondents had new house listings while none had any new condo listings and as expected, overall condos were on the market longer than freehold properties.
Finally I asked what those respondents planned to do over the coming few weeks. 50% planned on terminating the listing until after the holidays, 14% planned on taking a longer time off the market with hopes of relisting in the spring, while 7% where simply planning on letting the listing expire.
Either way you slice it, there are going to be some listings kicking around over the holidays and probably some deals to be found. I can personally think of three great reasons to buy during the holidays. First, the houses that are available are obviously motivated, second, you are not likely to be in competition with other buyers because they are out shopping, and finally, and we keep coming back to this, interest rates remain historically low.
As usual, be prepared for the spike in listings starting in mid January.