State of MLS in the past years
It has been a hot, HOT bunch of years in the #GTA. So hot in fact that it seemed like no matter what you did, the price was going up and the number of offers was sure to climb.
So hot in fact, that OREA put out a new form (form 801) to ensure that #realtors were not putting in “phanthom” offers to drive the price up even higher.
The average sale price was $552,925 in 2015 and $631,092 in 2016, a 14.1% increase in just 12 months. There were slightly more sales this year, with slightly fewer new listings. It’s rare now, especially so far in 2016, to see a property not sold above the listing price.
That was the opening line in a report that we saw (and saved). That’s a crazy figure, 14% rise in one year is absurd.
Very bullish
As with the financial markets (since the last #real estate crash of 2008), we have been fully bullish on all GTA real estate for a very long time. So long in fact (and with so much growth) that it leads to desperate people trying to find a home and resorting to #tactics that realtors employ to further drive the price up.
Hey you know what, I know you like this but I’ve got another buyer coming through this afternoon for their second look.
Multiple-offers
Your realtor(s) have an incentive to create competition because if two people are fighting for a property, they can get that premium price that they have promised the vendor in the listing presentation. If they are to quote you a price that is nice and low, they can attract more people, ideally from a lower price bracket and bring it to (a near) auction (i.e. #multiple offers) in a battle of the fittest (and most willing; or most frustrated).
Another nasty trick that often comes up is the tactical fear of loss. Many realtors will, as soon as they realize you have interest in the property, fabricate that there is another buyer, even with the new #form 801 – which is meant to get rid of these half-truths. If you listen closely, you may have heard something like “Hey you know what, I know you like this but I’ve got another buyer coming through this afternoon for their second look.”
This creates a feeling of loss and taps into a buyer’s emotions. Most buyers are therefore prepared (by this type of fib) to pay an emotional price for the home and will likely raise their offer price.
Hold-backs
A really useful trick to incite many concurrent offers on your home is to “hold back” offers until a later date. It’s sort of like allowing a preview to your home before an auction (or so they hope) and then on a specific “presentation date” all offers must be submitted and the seller will look for the “highest and best” offer.
Highest and best
Highest and best situations can make buyers mad, but the sellers have a good reason to use it. The biggest reason is they want to formally give every buyer notice of multiple offers and give them a chance to raise their offer. Highest and best is usually the most fair way to handle multiple offers. Sellers (and their realtors) also obviously use highest and best to try to get the most money they can for their house; as the owner of the house they have every right to try to maximize their profit or cut their losses.
Tactics to help buyers
If you are dealing with a multiple offer scenario you likely have a realtor representing you and the seller has their own listing agent. You can’t exactly talk directly to the listing agent, but you need your agent to get as much information as possible. Here are some questions that you need to educate yourself on ASAP (get your realtor to get you answers to these):
1. How many offers are there?
2. Are any of the offers cash?
3. Are we operating on the highest and best?
4. What is the highest offer you have now? (most are unlikely to give you a straight answer to this, but it’s worth asking)
5. Is there anything special the seller is looking for? Closing date, financing, take-back mortgage, large deposit?
Bully or preemptive offers
Finally, there’s the #bully offer. If you are going to make a bully offer, you need to understand a lot more information about the seller’s motivation because even if they are motivated to sell prior to the #hold-back date, the agent may not be because the more people that see this property, the more free advertising for them. If you are going to make an early offer, you need to understand the vendor’s motivation very well and understand that it might just be what the real estate agent is using to tease out how much you are prepared to pay because they might come back to say, “Actually, the vendor just wants to wait until the presentation date but they do know how much you are prepared to pay.”
What you should do as a seller
As a listing agent, I want the highest price for my sellers.
Here is how I often persuade buyers to bid against themselves, ultimately resulting in the winning offer regardless of the open house. For starters, I advise my sellers to continue with plans for the open house, unless they receive a super stupendous offer and, even then, we might not accept that offer until after the open house. If the seller is serious about waiting to accept an offer after an open house, there are still ways for the buyer to make a solid offer and all but ensure the seller will accept the offer.
I also let the buyer’s agents know up front that the seller most likely will hold out until the hold-back date, as we’ve already spoken to many other buyers who are expecting this to the date of presentation. But if they want to have an edge in offer negotiations, they need to act quickly and submit their strongest offer.
Should you accept?
To determine whether the offer is worth accepting, ask yourself the following questions:
- Is the price they are offering close to, or more than, my ideal sum?
- Are the terms and conditions of the offer reasonable?
- Am I really likely to be offered more than this?
- If this same offer was made two weeks later, would I be more likely to accept it?
- How busy is the #market at the moment?
- What is the financial implication of holding onto the home for longer (mortgage and interest repayments, delaying a future purchase, etc)?
- Is the property market changing regularly (will the home be worthless, the same or more in a month)?
- How desperate am I to achieve a sale?
If you have a good agent, they will be able to help you work through these points to assist you in determining your next move. For most sellers and in steadier real estate markets, it’s more important to consider whether the offer is suitable right now.
Why else would you accept?
There is a limited buyer pool: It may be that your property is valued particularly high or maybe it’s got a unique curb appeal, with a brightly colored exterior or bamboo plants out front, but homes that don’t appeal to the general public can be trickier to sell. With a smaller overall group of buyers to start from, there’s a good chance offers will be few and far between. For the sake of the sale price, the first offer you get will likely be your best bet.
You are pressed for time: Moves come about for a variety of reasons, and sometimes they’re out of your control. If you have to relocate to a new city or province (or country) for work, it’s much easier when you’re able to reduce the amount of time you have to pay for living expenses at two homes. You may also need to move quickly for financial reasons. If your job situation has changed and you’re now making less, relieving yourself from pricey mortgage payments will be a big relief.
Make sure you’re protected
Bully offers can ruffle a lot of feathers, and upset buyers and their agents alike. Consider that when an presentation date is set all the buyer agents start to plan accordingly. They may book a pre home inspection or their buyers themselves, in getting ready to present, may start to get their affairs in order, hire a baby sitter for that date, etc… More importantly, they believe, according to the #MLS listing and the listing agent, that they know exactly where and when offers for this property are being reviewed, and when it will sell.
So what are the rules and regulations for dealing with bully offers?
- the listing agent is required to contact those agents who have previously expressed an interest in the property.
The “expressing” of interest is tricky and very subjective. For the most part, I would protect my clients by ensuring that I contact any agent who has called about the property, any agent whose clients have come to my open house (if I had one) and any one whose card I have at the ready from the piles of business cards we gather from viewings.
According to the rules, the only time a listing agent MUST notify other agents about a bully offer is if those agents had registered an offer.
Now, since I’m working for the seller, I want to make sure that we are getting as much action on the house, so I would still call everyone, their neighbour, their parents and even their babysitters (I’m obviously being facetious) to get them to the table and see if I can entire multiple offers right then and there.
These are the sections of the Real Estate Business and Brokers Act that pertains to these offers and the open communication required among agents that have submitted offers:
FAIRNESS, HONESTY, ETC.
3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.CONSCIENTIOUS AND COMPETENT SERVICE, ETC.
5. A registrant shall provide conscientious service to the registrant’s clients and customers and shall demonstrate reasonable knowledge, skill, judgement and competence in providing those services.INACCURATE REPRESENTATIONS
37.(1) A registrant shall not knowingly make an inaccurate representation in respect of a trade in real estate.ERROR, MISREPRESENTATION, FRAUD, ETC.
38. A registrant shall use the registrant’s best efforts to prevent error, misrepresentation, fraud or any unethical practice in respect of a trade in real estate.
What you should do as a buyer
An early offer might make the seller wonder if she is losing out on potential profit by taking this offer from an excited buyer. To push the seller, buyers might give the seller a short deadline for offer acceptance, say within 12 or 24 hours, at which point the offer will expire. This is meant to induce action but it doesn’t always work and, in fact, could backfire.
A seller could resent the pressure. A seller could also make a counter offer, which would restart the clock for acceptance.
Offering list price. To buyers, offering list price is a sign of good faith, meant to show they are serious and committed. A seller, however, might wonder if they would get a higher price after many other buyers tour the home before and / or after the open house or they might wonder if the price is too low. A million thoughts race through the sellers’ heads at this time, often making them hesitant about taking any action at all.
White space (last page). Many buyer realtors will persuade their buyers to make an all-cash offer (which has been the norm for winning bids at many multiple offer scenarios in #Toronto recently). A cash offer means no lender requirements, no bank appraisal, no chance of the buyer not making it out of underwriting, where many things can go wrong. But many sellers realize it is all cash at closing, regardless of its origin.
Tips for Making an Bully Offer
Let’s say my seller receives an offer that is substantially higher than list price, this will often excite them and tend to make the seller feel kindly toward the buyers. Buyers can throw in a few more things, too, just to make the offer more attractive:
- Write a heartfelt letter to the seller about your situation and why you want to buy the home.
- Give the seller a little bit of extra time to move out, if they need it and it’s important to them.
- Offer to absorb a few closing costs fees a seller would normally pay, which would not interfere with an appraisal but would net the seller more money.
- Offer to buy the home without an inspection, appraisal or financing condition (be sure to discuss the pitfalls of this strategy with your agent).
- Submit a clean offer, backing it up with substantial documentation such as proof of funds and a preapproval letter.
Who do you think the seller will think about all weekend, from Friday morning to Sunday afternoon? The seller will be thinking about you and your offer. The seller will be wondering if they made a mistake and maybe they should simply accept your offer. It will gnaw at them for 3 solid days. Then after the open house, even if there are multiple offers, the buyer to whom the seller will likely gravitate will be the patient buyer who submitted an offer above list price offer on Friday and has been quietly waiting.
For all you active buyers out there; make sure your buyer-agent is in constant contact with the listing agent for a property you’re interested in.
Otherwise, you run the risk of not “expressing interest” as per the vague definition, and seeing the property sell out from under you…
offer fsbo realtor
