Skip to content

Posts tagged ‘real estate in toronto’

20
Dec

Agent Wants to Know If You Had Any Offers On Your Listing?

whisperingHow much are you willing to say about a previously turned down offer on one of your listings? This was the topic of last week’s Mastermind meeting at our office and it created considerable debate. Here is the scenario…. You have a listing that has been around for nearly two months. In that time you have entertained two offers. The first one came on offer night but it was much lower than the Seller’s expectations. Just after the third week, you terminated the listing and relisted it at a higher price. (This tactic has limited success but, depending on the time of year and a bunch of other factors, can help sell the property). Within days you received your second offer which was lower that the first offer. Now you are cruising in on month two. You are still getting lots of showings and agents are asking questions…why hasn’t it sold? have you been getting interest? AND… have you received any offers so far?

We had a rather entertaining debate at the office and on the local real estate Facebook group. One thread suggested that the listing agent has a duty, according to REBBA 2002, to say absolutely nothing. I find the logic incorrect on this. While our duty is to inform agents about the number of competing offers we are bound to keep the contents of competing offers confidential, but once an offer is rejected and expired, is it still our responsibility to keep the contents private? If you agree with that logic than you would have to agree that an expired offer is still, technically, an offer. I don’t believe that is the case. Plus I find it hard to imagine an agent responding to my question about other offers by saying “I can’t tell you”. In my mind that is a loaded response that immediately puts any possibility of a new offer off the table.

Another thread suggested that it was okay to divulge certain information about expired offers, such as price and terms (like conditions or closing dates) provided the Seller has given his permission. Generally this is not a bad answer but I don’t think it ticks all the boxes either. Essentially it suggests that the Seller is directing the listing agent to say something like “the Seller is hoping to get $1M and the last offer was only for $850k”. Clearly the agent is acting on the direction of the Seller but is he advancing his listing in any way?

While I recognize that we work under a strict code of ethics and the law, I believe there are a number of responses that work without implicating your Seller in a position of greed or being unrealistic. “We had two offers. One came really quickly and wasn’t what we were looking for, and the other had some conditions that the Seller was uneasy with” or how about “we were back and forth but in the end the parties just couldn’t come to an agreement”. and end the conversation with “we are still getting plenty of showings and traffic is high at open houses”. No lies, no disparaging comments. Simple truths. What you don’t want to say are things like “The offers didn’t meet my clients expectations” or “both offers were below market value” or “my clients expectations are too high” or ” my client is looking for $X (even if directed by your client to say so)”.

I am reminded about the saying that a good agent will say more by not saying. That’s a valuable lesson to be learned. I believe it is alright to say that you had two offers, but, if pressed about the contents it is okay to be vague. Don’t fall into the trap of saying too much especially if you are asked about price. Simply direct the potential agent to do their own research on comparable solds in the area and let them determine value. 20 years ago our market was much different. Properties stayed on the market for months so naturally agents would ask about previous offers and yes, we would speak the truth. There was true kitchen table negotiating with candid discussions while not giving away too many details. My advise, strike a balance between saying something and not saying anything. That may sound strange but the reality is that human nature should be your guide. People want what others have or want. If you say that there has been interest and offers then potential buyers want in on that action.

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

21
Jan

Top 4 Take-A-Ways From 2015 Real insider Client Briefing

insiderThis week I had the opportunity to attend the RealNet sponsored “Informed Advantage” client briefing entitled “GTA 3.0 – Property Market Crisis or Opportunity”. As usual, I enjoy any chance to sharpen my overall knowledge of the real estate market particularly The GTA and specifically downtown Toronto. If you haven’t attended this briefing before, put in your day timer for next year. You will be glad you did. There where several great speakers, including Benjamin Tal, Deputy Chief Economist CIBC World Markets. I took copious amounts of notes and so I thought it would be worthwhile to talk about the top 4 take-a-ways from the day. Oil, Interest Rates and The Canadian Dollar, The Euro zone and The US recovery, and Ontario’s future. Call it a quick primer on what’s going on at the start of 2015.

Lets start with Oil.

Tal believes that falling oil prices are essentially a ‘Black Swan”, meaning there is no reason prices should fall. His says that it is nothing more than a big expensive experiment by OPEC. Saudi Arabia has been slowly losing market share to Russia, Venezuela, The USA and Canada. They can produce oil at roughly $20 per barrel and make a healthy profit. Russia and Venezuela produce it at a substantially higher price, nearly $100/barrel, while Canada’s Oil Sands projects break even at closer to $60/barrel. Simple economics dictate that if you lower the price of oil substantially you will squeeze out the competition. Tal believes prices will stabilize around $60/barrel. This amounts to a monumental savings for Canadian consumers. (Annual savings of $17 Billion, $1800 per family).
A couple of other points to discuss that relate to oil, namely, China is one of the largest importers of oil. Tal expects China’s economy to benefit from lower oil costs which will have a ripple effect around the globe. Alberta is expected to slip into recession as a result of Oil Sands layoffs. The Alberta Government could suffer up to a $10B budgetary shortfall however with one of the lowest tax rates of all Canadian provinces, they are likely to increase taxes to make up, at least in part, the difference. Tal reminded the audience that the last three major recessions followed a huge spike in oil prices. He believes that lower oil prices are a positive event that will benefit 85% of the Canadian population. Here’s a new catch phrase….The efficiency paradox…The cheaper something gets the more we consume.

Interest Rates and The Canadian Dollar
Tal believes that the Bank of Canada won’t touch interest rates, in fact his belief was that the rates might even go down. He obviously has a very powerful crystal ball as his prediction came true. The reality is that lower oil prices will limit the need to increase interest rates. He was clear in his thinking that the BOC’s agenda is to keep the Canadian Dollar low. A low dollar helps exports and fuels manufacturing. Speaking of interest rates Tal pointed out that one segment of the lending market we should watch out for is the alternative or B lenders. They are typically unregulated and are rising in popularity by almost 25% per year. In his mind this growth has all the ear markings of a blooming subprime market. The good news is that overall this only represents 2.5% of the residential lending market. And since we are on the BOC topic, Tal brought up their recent report claiming that Canadian Real Estate was 10-30% overvalued. He believes that this is a grossly oversimplified report (comparing it to a junior high school project) that only measures against other countries. What the report fails to take into account is the fact that overall values are driven by two markets, Toronto and Vancouver. Both those markets share similar properties that are creating high average prices namely they are the dense city centres and are bound by strict geographic limitations. Vancouver has water on one side and mountains on the other while Toronto has water on one side and is surrounded by a Greenbelt. In both cases, limited land is responsible for higher prices.

The Euro zone and the US Recovery
Where China’s government has the ability to orchestrate a soft landing and oil will fuel the next growth spurt, Europe is a different story. Two factors are weighing heavily on the Euro. First, Italy is in its third recession in 6 years and the winner of the Greek election could default on the countries loan or opt out of the EU altogether. Currently the Euro zone has almost negative interest rates which could effectively force a run on the banks. Tal believes that despite all the turmoil the Euro will survive.
The US recovery is being led by one simple fact…the easing of credit. The US needs higher rates but the market is driving the Fed and not the other way around. Employment is also rising and remains a strong indicator as to the health of the economy. The US recovery has many benefits to Canada through increased demand of lumber and manufactured goods.

Ontario’s Future.
Currently one in four Canadians live in Ontario’s Golden Horseshoe. The population is expected to grow in the region by 2.4 million people by 2036. Cap rates for investment properties are at an all time low, land prices are at an all time high as are new condominiums and low-rise development in the GTA. Despite that, the GTA hit a record high $13.5B in property transactions in 2014. George Carras of RealNet calls this a “Crisi-tunity”. 5 significant office towers are underway in downtown Toronto (with size more planned) but as Carras explains, much of the current commercial development is driven by a replacement mindset, meaning tenants aren’t looking for more space…they are looking for better space. It is interesting to note that Downtown Toronto has the second lowest vacancy rate compared to eight of the largest Canadian commercial centres.
Ontario is a major consumer of oil and will benefit from lower prices. Any effective layoffs in the oil fields will be absorbed by increased manufacturing thanks to US demands and low dollar. Peter Norman, chief economist for Altus Group has looked carefully at long-term housing demand and states that aging in place is on the rise in urban centres which has contributed to lack of freehold inventory. Meanwhile, Millennials are choosing apartment living in ever-increasing numbers. Hot on the heels of a strong year in condominium growth, the biggest concern for developers moving forward will be the time required to deliver new product to the marketplace. Municipal requirements and bank financing are slowing the process down greatly. It is important to recognize that the large increases in average home pricing is not limited to Downtown Toronto. Carras cited an example of a 3300 sq ft home in Vaughan that sold in 2004 for $573k. That same house in 2014 is now $1.553M.
In large part due to the restrictions of the Greenbelt, prices of low rise homes have rapidly escalated since 2011 and are now at $705,813. The price gap with high rise homes, which were only slightly lower by comparison back in 2011, are now $251,337 lower. High rise prices still increased in 2014 (up 4% to $454,476).

Clearly there is a lot to digest here. If you are able, download a copy of 2015 RealInsider™ Client Briefing. There are over 160 slides from the presentation available. Great stuff to share with your clients who are worried about buying in Toronto.

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.

4
Nov

Transparency at the Offer Table. Not Just a Pipe Dream

transparency blogAt a recent mastermind session our group talked about the frustrations we often feel when we are at the offer table. There are many opportunities for the evening to go wrong because the process is secretive and often skewed to favour the listing agent and there is always a chance that we, acting as a buying agent, will have to go back to the buyer and let them know that they didn’t get the house. Sure, it could be as simple as price, but as you know, there are many chances for error, incompetence or fraud.
So in our meeting, we wondered if there were a way to sell a home with complete transparency. Could we make the process so fair that everyone who offered and lost could walk away knowing they were given every opportunity to buy the house? We worked through several possibilities, talked through potential land mines, and played devil’s advocate on a number of different scenarios.
One of our solutions could be best demonstrated by this example. You’ve listed a property for $699k and have received 5 offers. You’ve told all the participating agents that you will be running the process as follows…after everyone presents you are going to meet with the agents collectively and disclose only the price of the highest bid. At that point you will give the agents 1/2 hour to speak to their clients and return, if they so wish, to participate in the second round. Four agents return for the second round and present their offers again and once more you meet with them and announce the winning bid. This process continues until there is only one agent standing. In many ways it mirrors an auction process but requires the skill of a buyer agent in negotiating fairly with the seller and the seller agent. All agents are present and counted for so there is no chance that there are phantom offers. At no time is it made clear which agent has the leading bid, nor does that agent know how close the other offers are. The winning offer is successful based on its merit (and or price) and there is no opportunity for shenanigans. In the event of an offer from the listing agent, the manager or someone else from the office manages the process and the listing agent is unaware of the other offers.
From the surface the idea seems to have merit until you dive into REBBA 2002, which is the Act that we must follow (in essence, our play book). In it, there is expressed direction that an agent does not have the right to disclose any terms of an offer even if directed to by the client seller. So if you liked the idea of a completely transparent offer night, don’t hold your breath.
It occurred to me that rules and regulations are brought about to govern the way business is conducted TODAY. When the way business is conducted changes, the rules (or laws) get updated. We see that happening today with the Condominium Act which was first enacted in 1998. Certainly a lot has happened in that world over the past 16 years and even with tweets and updates, one wonders if an act that old holds the answers to an ever-growing segment of the real estate market. Like the Condominium Act, I wonder if, when first established, REBBA 2002 could have ever imagined a market as strong and unrelenting, or something as strange (back then) as bully offers.
At the end of the day, the only answer is hard work. As the listing agent, our job is to run offer night in the most professional way which, among other things, means refusing to represent your own buyer. We need to keep the lines of communication open with every agent bringing an offer, explain the process that will steer the presentations and stick to them religiously, and above all be fair and honest to everyone involved in the transaction. For buyer agents, come prepared with your best offer, have a good deposit, and make sure your buyers are nearby. Keeping simple rules will make the transaction go smoothly, eliminate confusion, and keep everyone out of court.

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.

%d bloggers like this: