I had to laugh. A few months ago I bought a property in the country. Knowing the Toronto market like I do, I was prepared to shell out $50,000 as a deposit with my offer. Before I wrote the cheque I thought I would just ask the listing agent what an appropriate deposit would be. His response…$5K should do it! The experience highlighted the differences between our two markets. One, a fast paced, come hell or high water environment where a big deposit means business, and the other, gentle simplicity where trust is the underlying currency.
The reason I bring this up is that many years ago, at the start of my real estate career, deposits were never really that high. It was always impressed upon me, when I was starting out, that the deposit should at least cover the commission but that guideline was seldom adhered to. Today, the deposit amount plays an intricate role in the purchase of a house. A big deposit, in the form of a bank draft will beat out a small deposit written on an uncertified personal cheque every time. In fact, nothing says ‘I’m serious’ like a deposit of 10% of the property value when offering. With big money on the line, buyers need to know the implications….on the off chance that something goes wrong. Clearly its a lot of money to leave on the table.
What I am inferring here is that the buyer interview just got a whole lot more important. We are long past taking a buyer’s word that they are approved to buy a house. A responsible Realtor needs to do a deep dive during that initial buyer meeting and be prepared to ask some often difficult questions. Buyers have to know that their deposit might be at stake given the fact that there are so many places where things can go south. It’s not just buyer’s remorse anymore, we are seeing deals fall apart because banks are changing financing terms on the fly.
So what can you do to help Betty Buyer? Ask more questions and offer more advice. It’s no longer good enough to ask if she has talked to a bank. Get Betty to provide a letter of commitment from the bank OR get her to talk to YOUR guy. Talk to Betty about the perils of not closing. Explain what happens if the house doesn’t appraise out. Ask if there are sources for her to find more capital (like the bank of Mom and Dad). Talk about closing costs and various taxes she will need to pay. Its time to take the buyer interview to the extreme vetting stage! For some agents it will be a difficult conversation. For others it will be instinctive. But at the end of the day it is not just about all saving you grief and heartache when the deal goes south, its about going the extra mile for your buyer client. As the listing agent, there is extra onus on you to ensure that the buyer is QUALIFIED to buy the home. This means asking the buyer agent questions about their buyer; how long have they been associated? Have they done offers before? What steps did the buyer agent take to ensure the buyer has money to close? I am reminded of a deal I did many years ago that went sideways after an accepted offer. I asked the buyer agent what they new about their buyer and was shocked to hear that they met them at an open house, and didn’t have time to properly qualify them. Hey, not all deals will go according to plan but if you ask the right questions first you eliminate problems down the road.
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.
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.
Every year, around this time, I surf through my blog statistics and try to get some idea of how I did over the course of the year. Did I pick up subscribers? what posts got the most views? which received the most comments? The goal of this exercise is to see what’s working and what isn’t. Pretty simple, really. So, without further ado here are the top ten posts of 2013.
Number 10. We have seen it a fair bit this year, and lets hope the tide is turning as more and more people get reported but it still never fails to surprise me when an agent uses other agent’s pictures to create fake ads on 3rd party sites like Craigslist or Kijiji. Surprisingly, the public hasn’t heard the old expression….if it is too good to be true, it probably is. We call it Gaming the System.
Number 9. I had a lot of fun with this one because it combines two of my favourite things; office meetings and infographics. I asked agents at my office how they went from a phone call at the office to a listing a home. I called it The Ultimate Pricing Guide.
Number 8. My friendly neighbourhood Coburg agent Dave Chomitz, who follows me everywhere (or is it I that follows him) gave me the idea for this post. He had an idea…and doesn’t it all just start with an idea, on how to build his own real estate market. Check out his success and then come up with your own Niche Marketing Ideas.
Number 7. Surprisingly 3 of my top 10 of 2013 were actually written and published in 2012. Talk about longevity. But when the content is still relevent, that can happen. In this case I wrote about a seller who wanted to sign back for more than the asking price. What should stand out in any agent’s mind is that if you list a home low in order to get multiple offers, you need to explain to sellers what could happen if the plan doesn’t work.
Number 6. Saw a few cases of this during the year. A house is sold and the appliances that were thought to be included were different when the buyer took possession. This made us conclude that listing agents need to CLEARLY educate sellers about inclusions and exclusions,but more importantly, buyer agents need to do their own due diligence in marking down the important stuff. I called this one, The Old Bait and Switch
Number 5. Another hit from 2012. I did a bunch of research on this one and then, while attending NAR in Orlando I learned a fundamental thing about open houses. After 20+ years in the business it never occurred to me that people who went into your open house weren’t there to look at the house. They were there to check you out. I guess it is true…Open houses aren’t for suckers.
Number 4. How many times have you heard Sellers say ‘boy, I should have taken that first offer’? Probably never because that would be like admitting defeat. Still it was fun to write about The First Offer is the Best Offer.
Number 3. This one is my proudest blog post because it’s a video (featuring ME!) and most viewed video on YouTube. The content is pretty good too and drove this post to become the most shared on 2013. Nuff said. Here’s your opportunity to watch How to Become a Real Estate Super Hero. Blammo
Number 2. The last man standing of 2011. The anatomy of a Canadian Realtor. Funny how two of the top ten posts are infographics.
And finally, drum roll please, the Number 1 blog post of 2013 remains my post on agent statistics that I did in 2012. Probably due for an update soon but I suspect the ratios will remain pretty consistent. It seems that agents want to know how they stack up to the other 38,000 agents in their market.
Well thanks everyone for a fun year. Look forward to another year of fun and discussion.