Here is my tip of the day. We’ve all been on multiple offers. Sometimes we win, sometimes we lose. In the losing category there are different levels of loss, but one of the most painful is the loss by a few thousand dollars. Ouch. Simply speaking, these types of loses tell you one undeniable fact….You know what you are doing! You have done your research, you know the comparable properties in the neighbourhood, you know the homes strengths and weaknesses, and have pinpointed the value…almost. Conversely, don’t let getting blown out of the water make you crazy. Losing by $50k or more, while painful, sends a much different message. It could be read as…not educating or preparing your buyer, not understanding the neighbourhood or market, or simply not reading the signals given off by the facts (number of offers for instance). There is one other thing to consider…Sometimes it just happens because you just never know what the motivation is of the winning bidder. They may have lost out a few times before and are willing to just throw everything, including the kitchen sink, at the next house.
There is no question that the GTA market has its challenges. The media has thrown a lot of coverage on the fact that there is a supply issue and with demand at peak levels, the simple economic rules of supply and demand prevail. Consider the latest news of over 80 offers on a home in Brampton. The truth is that the biggest bag of money wins 99 out of a 100 times. To increase your odds when you don’t have the most money check out my tips for increasing your chances here. For those that lose out it is important to have a comprehensive debrief of the bid with your clients the next day. Stay positive, share what you’ve learned and then move on to the next one.
Awhile ago I wrote a post about having to lose a few in order to build trust with your buyer. Many agents in my office have experienced this from time to time. Agents who are dealing with first time buyers are more susceptible to this phenomenon because those buyers are a little more concerned with paying too much or getting financing. They are still finding their footing. The process of educating the buyer might take several weeks, even months. You may have to look at a lot of homes too so keep a record of what they have seen and let them know what they sold for. It is important to point out some things about each house and make notes about what they liked and didn’t like because after a while all houses will start to look the same. At the end of the day, your perfect comeback is, “hey, we know what we are doing”.
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.
Many years ago I wasn’t afraid to submit a lowball on behalf of my client. Actually, if the research showed that the property wasn’t worth the purchase price, I was happy to go in with guns blaring and make my stand no matter how grumpy the seller was. In most cases I would look at a couple of facts; first there were the comparable properties. Easy enough to do when they were condos, but houses were a bit more difficult. sometimes you had to really massage the numbers to prove a point. Of course the second fact was “days on market”. We as agents look at this closely, but buyers today have been used to one simple truth…if it didn’t sell in a few days then it was overpriced. Why wouldn’t they? The news is inundated with stories of houses selling in multiple or bully offers.
So a few days ago an agent in my office tells me that he got a lowball offer on one of his listings. At $599k the agent would admit that the price was a little aggressive. If he had his way he would have listed it at $549k, held back offers and hoped for $560k but the owner was adamant that he wanted to list higher and given the market, there was always a chance. After a solid turnout at the agent open house, plenty of traffic during the weekend open houses and consistent showings during the first week. The agent, working on the direction of his client, had a holdback date, 6 days after the listing hit the street. But despite the early flurry of activity, foot traffic quickly declined and the offer date passed without as much as a nibble.
The agent did what he was supposed to do. Changed the listing to reflect that offers would be reviewed at any time, and then got on the phone. The first batch of calls went to a few agents who expressed some interest early on, followed by everyone else just to let them know that no offers were received. Unable to drum up any offers, he got back to work. Flyers, open houses, door knocking, etc.
After the second weekend of public open houses, he finally got an offer. $515K. Nearly 16% under the list price. He knew right away that this one is going to be a hard one to sell to the owner who was probably expecting something over $600k. Having been on the other end of this equation several times I know exactly what the conversation was like between the buyer and the buyer agent. After being told the house didn’t sell on offer night and seeing that the house has been on the market for over 15 days, the buyer had only one conclusion…. Overpriced. Lets throw in a stinker bid and see how low the seller will go.
Experience has taught me that this is not the right tactic. Low ball offers put the seller on the defensive right off the bat. They are likely to likely to sign back at full price or not at all. The buyer agent sits across the table from the seller with an immediate disadvantage not likely to be smoothed over very easily. So what are you options as the buyer agent? Simple. Do your homework. Conduct your own CMA and sell the price using pure hard facts because facts don’t lie. Let the buyer know that success is derived by coming to the table with a strong position backed up by hard numbers.
The seller agent has a tougher job. They do not have any influence with the buyer so must communicate to the buyer agent that they will have a better chance if they bring a reasonable offer. As you know, the seller agent can’t disclose motivation or any other pertinent facts like “I told the seller the house was only worth X” or “my seller is greedy”. Instead talk to the buyer agent about comparable homes in the neighbourhood and nudge them in the direction you need to be at.
Remember to consult local data to get a sense of what the average days on market are for the district or neighbourhood. Chances are you will be surprised how high that number is. Consider that in March 2015, one of the hottest months of the year, in Toronto’s C01 district (where my office is located) average days on market for freehold homes is 27 days yet if you asked anyone, agent or not, they would say houses sell much, much faster. There is perception and then there is the reality.
mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President of the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB 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.