Who Ultimately Determines Real Estate Market Value?

Posted on May 11, 2011 by Frank Gentile--Broker of Record

You hear the terms “seller’s market” or “buyer’s market” often in the real estate industry.  A seller’s market indicates control, by the seller, in determining their market value for their homes.  Toronto, as we speak, is under a seller’s market, thus seller’s are in the driver’s seat when it comes to determining market value for their home.  Whether it is one offer or multiple offers, the seller can ultimately control the price they get; on the surface it appears so, but I beg to differ. 

I believe that ultimately it’s the buyer who determines market value, no matter what market you are in.  When a real estate market is slow, the economies of scale indicate that there is more supply as apposed to demand.  In a slow market the buyer has more choice, and therefore has more negotiating power.  In this slow market there are no multiple offers and a buyer has time to negotiate his/her deal, and ultimately the buyer accepts a price satisfactory to him/her.  In this market the buyer agrees to buy the home at a negotiated price, thereby establishing market value.  It’s the buyer that agrees to buy a product for such a price.  Without the buyer buying, there would be no sale, thus the buyer sets price. 

It gets interesting in a hot seller’s market.  This is the market that all industry professionals deem the seller has control of the price of their home, and therefore sets market value or price.  I believe that in this market, the buyer also sets market value or price.  In this market there is more demand than supply, thus driving prices upwards.  This is true; prices do increase in this market.  But who is the reason for this sharp price inflations we have been seeing?  The answer is the buyer! 

There are plenty of multiple offers in this market, especially in Toronto.  I see 10, 20 sometimes 30 offers on properties.  Ultimately the buyer decides to enter into offer competition, and the buyer decides if they want to pay the inflated price.  The buyer once again sets the price and market value for the home.  The seller just puts his/her listing out there.  It’s the buyer that subjectively decides to compete and buy the home, thereby establishing market value.  There are a lot of motivational factors at play with buyers in these market conditions that I will blog about in the future. 

In this same “sellers market”, I have also seen listings put on the MLS that were supposed to see multiple offers and did not.  Not so much a “seller’s” scenario is it?  Again the buyer analysed the scenario, felt the property was not worth, and did not put an offer.  Eventually the home will sell at the price the buyer wants to pay, again establishing market value. 

A “seller’s market” means that a seller will see more activity on their homes, and will achieve terms they want; but it is the buyer that agrees to buy and therefore setting market value.

Posted in Real Estate Market Value | Tagged , | 7 Comments

Property Guys.com…..The Wolf in Sheep’s Clothing

Posted on April 17, 2011 by Frank Gentile--Broker of Record

The Property Guys.com or “a la carte” brokerages of the real estate industry are a marketing disguise’s for FSBO’s (for sale by owners).  These companies are glorified websites that post your home on the internet, like an auto trader, and require the home owner to setup their own appointments and negotiate their own offers.  Is this not a private sale?  This is a private sale and these companies are making the general public believe they are adding a new form of real estate process for the informed buyer.  Perhaps the competition bureau should investigate these companies to see if there really is added service to the consumer.  Does the competition bureau even care that these companies are just websites and offer no protection to buyers and sellers in the real estate process? 

Walter Melanson, Director of Partnerships with propertyguys.com states “high-fee real estate agents are a relic of a different world, a different economic reality and a different home owner.  In a networked world, where eBay is replacing newspaper classifieds, expedia is replacing travel agents, and netflix is replacing video stores, propertyguys.com is replacing the high-fee real estate agents model.  Propertyguys.com is transforming the way people sell their home.”  Somebody should give this guy a wake up call.  

FSBO’s have been around since the 70’s.  All these companies have provided is an alternative platform for private home sales to be advertised.  In the past for sale by owners used to advertise in print and now they can advertise on the web.  Wow, what a revolutionary idea! 

Mr. Melanson states that his company is like eBay, expedia etc…  Wishful thinking Wally!  You’re not even close.  Besides these companies he mentions post products in hundreds of dollars, maybe thousands, not HUNDREDS OF THOUSANDS (like a home). 

Your home is the biggest investment people make in their lives, why would they chance by selling or buying private?  When you post on propertyguys.com or hire an “al la carte” broker, you are in essence selling your home privately; therefore the pitfalls should be explored. 

Studies have shown that FSBO’s, as opposed to hiring an agent, net less money 96% of the time.  Putting your home on propertyguys.com will only reach a small portion of buyers, thereby underexposing your property.  Underexposing your property will lead to you not getting the market value for your home.  There are security issues, where you do not know who is coming in your home.  There is the unqualified buyer, where a seller finds out at the last minute before closing that a buyer has no money; a buyer gave little deposit and the seller has bought and is now up black creek.  There is also the issues of having your lawyer prepare your offer; issues of getting a hold of lawyers, or what it actually costs.  The pitfalls of FSBO’s are extensive, and sellers and buyers should be aware of them before they fool around with hundreds of thousands of dollars. 

In a hot market, the discount services always pop up.  When the market slows, you will see that these companies will fade away.  The realtor is not going anywhere because of their professionalism and experience of dealing.  There are builders that will pay realtors 6% (not $350.00) to ring in buyers.  Realtors’ work and that is why we are not going anywhere.  

The propertyguys.com and “a la carte” realtors paint a pretty picture with commission savings, but beware that they are only a wolf in sheep’s clothing!  FSBO’s will always be around, realtors will always be around; the only guy’s that won’t be around is the propertyguys.com.  By the way what happened to Mike Bullard (there spokesperson)?

Posted in For sale by owner | Tagged | 18 Comments

Is Real Estate Professionalism Dwindling?

Posted on April 2, 2011 by Frank Gentile--Broker of Record

The Real Estate Council of Ontario and the Toronto Real Estate Board preach to the general public that the agents they send out into the world are professional.  Is the picture being painted a farce?  Or is it the agents themselves that start out as being professional and then turn unprofessional? Or is it that agents getting their licenses are not business oriented and unscrupulous?  

TREB and RECO have installed very rigid guidelines with agent’s code of ethics; they have set up a policing system to keep the unscrupulous agent in check.  But this is all set up for the general public’s complaints with realtors.  However, there is no policing of agents between each other.  Yes we realtors provide professionalism to the general public, and we are governed to the affect, but where is the professionalism between realtors? 

                                            

My agents come to me week after week with issues with other agents.  Issues arise where the listing agent does not return phone calls when a buyer agent has an offer ready to present.  Another issue I have come across was agents complaining about the way a multiple offer scenario were handled.  The complaints go on and on.  The underlining issue with all the complaints is that real estate agents are not providing professionalism between each other. 

The real estate industry was created with one fundamental philosophy:  Listing and Buying Agents are to work diligently and fully co-operate with other to achieve an arms length transaction whereby the seller and buyer are both content.  Agents do not co-operate with each other anymore.  There is no professionalism nor is there any business savvy from these realtors.  When I started in the real estate industry, I remember learning the ropes from agents that were in the business for over 25 years.  Through these pioneers of real estate I learned to co-operate fully with other agents, and try to get the deal done.  I do not know who is coming out of the OREA real estate college, but I can tell you one thing they should be selling in flea markets, not in real estate! 

Let me educate the unprofessional; when an agent brings an offer, call them back and keep them informed step by step with the progression of the offer.  It’s the offer that matters not you, the agent.  So stop playing games and make the deal.  Is that not why you got your liscense, to make deals?  The list of unprofessional infractions is long, and I will save it for another blog.  It boggles my mind why an agent would become a road block for another agent.  We need to work together to make deals, and work against each other to break deals.  

Unprofessional realtors act the way they do because the governing bodies of our industry don’t care about getting involved.  What the brain child’s behind the governing bodies do not realize is that this indirectly affects the general public. 

RECO only deals with public vs. agent matters and TREB does not care to get involved.  TREB will call the agent’s brokerage and speak to them about it.  Kind of like a slap on a hand of a monstrous WWE wrestler.  TREB needs to get more involved with dealings between agents.  Agents can not sort this out on the field.  Every time an agent of mine comes to me with a complaint, I tell them to let me get involved and call the other manager or call the agent.  But I find agents do not want to jeopardize the deal.  This is why a third party needs to be involved.  Create a three strikes policy.  Three strikes and you’re suspended.  TREB should create a black list of these agents, so we know how to deal with these agents. Instead TREB allows our commissions to be cut further with non-service firms, which in turn breads this environment of flea market selling. 

This unprofessional behaviour has really increased over the last 10 years, and shows no sign of improving.  TREB needs to get more involved, because at the end of the day when agents put themselves ahead of the deal, they jeopardize the general public!

Posted in Negotiating Offers | Tagged , | 15 Comments

Doom and Gloom Articles Predict the Apocalypse of Toronto Real Estate.

Posted on March 12, 2011 by Frank Gentile--Broker of Record

I have read several articles relating to the end of high priced real estate in Toronto.  According to these doom and gloom newspapers/magazines articles, Toronto will face a 35% price decrease in the coming years.  Does anyone really buy into these articles?   Whether you do or you don’t, people have read them and are now taking head.  Buyers around Toronto and the G.T.A are all breathing a sigh of relief as they now can put an offer on a house and do not have to compete with multiple offers.  We will enter a time of stabilization, peace of buying mind, and no more line ups for builder inventory.  

Unfortunately the only bubble that will burst is the very ideology that prices will drop by 35%.  These articles are just predictions, and not based on hard facts.  Economists have been warning us for years that this was going to happen, and the reverse happened.  Buyers continue to compete in multiple offer presentations in the city of Toronto, thereby over paying houses and increasing market prices.  We have seen prices increase by 5-10% already and we are only in the first quarter.  These doom and gloom newspaper/magazine articles are merely to sell magazines.  Everyone loves to read about misfortune and loss. 

It is relatively cheap to borrow money from banks these days, and this is why the market moves along coupled with the fact that Canada is a stable country with millions of immigrants immigrating here.  I believe mortgage rates would have to reach 10%, an economic melt down would have to occur, and people would have to stop migrating here. 

 The last time rates were higher than 10% was in late 70′s to early 80′s, and that was a time when you needed to sign in blood to get a mortgage.  Mortgage rates are at 4.25%, up from 3.69% fixed; the banks are handing out free money now.  The banks can change policies to slow down lending, but at the end of the day it’s cheap to borrow.  Buyers qualify more easily for mortgages and if you put enough money down the banks will even throw in a line of credit.  It’s party time these days for the banks; not only do they make money on mortgages, they make money on service charges and credit cards.  

Furthermore, the government changed their realty taxation system about 10 years or so ago, from the mill rate system to the house value system.  They hired a company (MPAC) to go around and appraise your house, and based on that appraisal the government applies a percentage and that is how they come up with your tax amounts.  Here’s the thing, MPAC does this every four years, and the next four year cycle commences in 2012; this means that MPAC will go around and appraise everyone’s homes next year. 

So let me ask the question, if real estate prices drop by 35% (as indicated by the doom and gloom articles) will the government reduce your taxes?  Surely they will reduce your taxes’; the assessments will be 35% lower in the real estate apocalypse of 2012. 

This is where the doom and gloom articles loose validity.  There is one thing you can bet the farm on in Canada, taxes never go down!  Do you really think the government of Canada will allow values to decrease by 35%?  The government would have to justify why there assessments are hire; the government would be bogged down with home owners asking for re-assessments. 

Does everyone grasp the amount of money a government generates from property tax?  It’s the oldest form of taxation (you can thank the Romans for this).  Governments borrow against property tax and they build infrastructures based on this money.  The property tax they will generate form tax in 2010 has already been spent; it was spent five years ago.  Today’s government wants values to continue to rise slowly, with a little boom here and there.  Today’s government will try to keep pricing where it is, barring unforeseeable climatic or economic melt down. 

On a final, you should not take to much stalk in most real estate articles, because they take national averages and make them seem it applies to you.  Real estate pricing is very local, and something that happens in Timbuktu Saskatchewan does not mean it will happen in Forrest hill Toronto!

Posted in Real Estate Market Forecasts | Tagged | 540 Comments

Home Sales Down in Toronto, But Prices Are Still Rising

Posted on February 26, 2011 by Frank Gentile--Broker of Record
 The Toronto Real Estate Board (TREB) has reported that we are 13% lower than January 2010 real estate transaction pace. “While off the record pace experienced a year ago, the GTA resale market has started the year on a solid footing. Home buyers in Toronto and surrounding areas continue to benefit from a diversity of housing types for sale at many different price points,” said TREB President Bill Johnston. 
The prices are still rising in Toronto and G.T.A, and this is due to a shortage of listings.  Basic economies of scale teach us that unless supply exceeds demand, prices rise.  As a practicing realtor, and not some analyst looking at charts and graphs, I can tell you that there are not a lot of listings out there, and I have a broad spectrum of buyers.  It may be pre-mature and the spring market has not yet approached us, but if new product continues at a turtle pace, we may see bidding wars again in the spring. 
                    View Average Prices in Your Area
“The average selling price is expected to grow at a moderate pace in 2011. Growth rates in the three to five per cent range will be sustainable from an affordability perspective,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.  According to TREB, the average sale price is up 4% from last year from $409,058 to $427,037.  It’s not even March and house prices are 4% higher, I would think we would be closer to 10% by years end. 

The government is trying to slow this pace down by introducing lending policy changes, interest rate hikes etc.  This meddling in our free market has accomplished nothing.  The most recent policy change the government has tried was to roll back amortization rates from 35 years to 30 years.  Rumours suggest that they will role it back from a 30 year amortization to 25 year amortization, and further lending rate hikes.  As for now, the governments attempt to slow housing inflation has done nothing.  The government will perhaps try to roll back amortization to 25 years and increase rates to 5% in attempt to slow inflation, but all they are doing is bringing back lending policy to 10 years ago; Approximately 10 years ago is when this housing boom started. 

What the government does not understand is human nature.  If you give a person an inch, they try to take a foot.  The lending policies and interest rates over the last 10 years were implemented to help people cope with debt.  The actual outcome of this ideology was people taking advantage and borrowing more money, over leveraging, and accumulating more debt.  

Toronto Life magazine published an article indicating the end of the real estate cycle; they indicate that the bubble will burst, that Canadians are living in debt like the Americans.  I have heard this statement for the last 5 years; in actuality it cost me money listening to these doom and gloom articles, because of my lack of investing in an increasing market.  Our economy, banking and employment are strong for now; no one really knows what will happen in the last half of this fiscal year.  

Who knows what the future hold for our economy?  I personally would welcome a price adjustment in housing, not frown on it.  It allows me to start investing in Real Estate again instead of putting money in RRSP money pit with no escape!

Posted in Real Estate Market Watch | Tagged | 794 Comments

Life with “A La Carte” Real Estate

Posted on February 5, 2011 by Frank Gentile--Broker of Record

Now that the dust has settled, and realtors have had a chance to calm down, what of A La Carte Real Estate?  The aftermath of the Toronto Real Estate Board selling there members out has left realtors and homeowners wondering if A la Carte Real Estate Firms are working?  The answer is no, they are not working. 

I have not seen any listings from these companies in any area I have searched for properties.  Perhaps the general public are realising that these firms are another marketing gimmick.  The general public are seeing these firms for what they are: a do it yourself project!  These firms expect the very busy professional to make appointments themselves and negotiate themselves, or better yet wait for a lawyer to negotiate for them.  Good luck with the latter statement, lawyers are not at anyone’s beckon call.  You want to know who is readily available.  Yes, you guessed it, realtors! 

The listings with these reduced service firms have all expired, at least the ones I was following.  This is another gimmick, like realtors that say they will buy your house in 30 days if they don’t sell it.  These firms have popped up in the past and they will fizzle like they did in the past.  If the market does slow, sellers and buyers will call realtors again, because that’s what we do, we bring offers on homes. 

I still question the relative ease in which way the Canadian Real Estate Association folded, and allowed these firms into our private membership driven Boards.  I still hypothesize that the Canadian Banks are behind this move.  They want in like they wanted into the insurance business.  The difference is with Real Estate, you have to have a license to sell on the Toronto MLS.  As we enter an era of moving from agency to consultation, the banks will have there opportunity. 

As for now, these small insignificant A La Carte firms are not making any waves by all means.  Take a look around your area, what do you see?  You see brokerage signs.  This indicates to me the great failure of these firms.  The public has spoken, and they have chosen realtors. 

I should discuss the CommFree commercials on City Tv.  This is another farce.  I really like the simple picture the paint with regards to selling your home.  Yes bake a cake, and you to will convince a buyer that they should buy your home.  This is borderline stupidity.  This company is painting a picture to sellers that Buyers are naive.  Hey buyers, they think you can be easily convinced and fooled. 

The dust has settled, and I do not see these firms taking any noticeable market share from realtors.  It’s a good thing that realtors are defending their ground, because there local boards won’t.

Posted in Flat Fee Real Estate companies | Tagged | 525 Comments

Why Do First Time Buyers Fear Jumping Into The Real Estate Market?

Posted on January 23, 2011 by Frank Gentile--Broker of Record

There are a lot of first time buyers out there waiting for the market to dump.  These first time buyer’s have been waiting for years to jump into the real estate market in Toronto or the G.T.A., sitting, waiting, and maybe renting.  Depending on when these buyers started looking at buying a house, they might have cost themselves 10% to 50% in price increase. 

I know one individual that has cost himself approximately $300,000 dollars in market value.  This individual had $100,000 down payment 10 years ago.  This down payment at that time could have bought him a $400,000 dollar house, with a $300,000 dollar mortgage or a $350,000 dollar house with a $250,000 dollar mortgage.  Comfortable right?; very comfortable mortgage considering the average mortgage right now is $350,000 to $400,000, and your living in a semi-detach.  Ten years ago $400,000 dollars could have bought you a home in Etobicoke’s prime Kingsway area.  That house today will fetch $750,000 to $1,000,000, not renovated.

I do not think that the money that could have been used to invest in Real Estate appreciated at the same pace as the Real Estate market.  No mutual fund or bank could have reciprocated the appreciation of real estate in dollars earned.  A high risk stock might have made you this money, but at a huge risk.  Real Estate is a safe investment at the end of the day, and those who snoozed have lost big time. 

Could it be that the reluctancy of first time buyers (not all of them, just the ones that have not jumped in) could be attributed to old fashion parents dictating to their kids how the glory days were?  The glory days of to early 90’s are gone.  The early 90’s saw home prices plummet by 50%-100%.  If you were cash rich in these times, you could have bought half of Toronto.  Anybody waiting for this to happen again is dreaming.  It’s a different Canadian economy now, one where the dependence on American economy has diminished.  Canada is now a global player, and immigration is flourishing.  We are the next Switzerland.  Immigrants want to come to Canada as opposed to the past where Canada received individuals that could not get into America.  We have a strong economy, we have health care, strong banking policies, and we are clean and safe.  If the fearful first time buyer is listening to people preaching this theory my recommendation is to run!  

First time buyers need to jump into the market.  I know the prices are high right now, but you have to start somewhere.  An individual can not save the amount of money at the rate housing is increasing.  Industry experts are predicting a 4% rise in prices this year; that is another $50,000 dollar increase on an average price of a home.  I believe that the increase in price will be closer to 10% as oppose to the 4% industry experts are predicting.  The demand is still outweighing the supply.  There is not a lot of product for sale out there, and when a property comes out, you are still seeing bidding wars.  It’s only January and I have noticed prices already trending upwards.  Its basic economies of scale!  The “Experts” say strong and stable, I don’t buy it.  The government and banks are trying to curb demand with conservative forecasts.  It won’t work.  They were wrong last year, when they predicted a 2% increase.  They can’t raise interest rates that high, because that would destroy the economy; and besides property assessments would decrease which would lead to reduced taxes based on the new taxation system.  Now we all know that taxes never go down! 

First time Buyers need to jump into the market and start building equity in their homes.  Prices are not going down for the near future and the reluctant first time buyer is costing themselves thousands of dollars that they will never recoup.

Posted in Real Estate Market Forecasts | Tagged | 527 Comments

Pitfalls of Franchise Real Estate

Posted on January 8, 2011 by Frank Gentile--Broker of Record

The has been a sudden resurgence of independent brokerages in Toronto and the surrounding G.T.A.  Many independent brokerages are moving away from franchised names.  Is franchise real estate dwindling in Canada?  Not as of yet, but there are many new brokerages opening and a lot of them are going with there own name.  Some companies should use a franchise name because I have seen some ridiculous names out there!  But never the less, they are choosing the independent brokerage route. 

In the United States, which is still a leader of industry no matter what anyone says, the independent brokerages thrive and actually have more market share than the franchises.  So why is it that in Canada we rely heavily on the Franchise industry?  Are we sheep or drones?  I believe we are sheep and we follow the masses.  I believe we rely on American marketing innovation very heavily.  How else can you explain, for example, why Home Depot Canada out sells any market in the United States?  Because we love American marketing and businesses.  The Americans love our market.  Canadians are the most American brand loyal country probably in the world.  Canadians love their logo recognition.  The Franchised Real Estate in Canada is actually American, with the exception of a few.  The Canadian born franchise real estate companies are just a cheapened photocopy of the American franchises. 

In Toronto and the G.T.A we are seeing more independent names thriving.  Why are these brokerages not buying franchises?  I can speak only to my experience and tell you that I was tired of being part of something that resembled a “flea market”!  What I mean is that everything became so cheapened.  I was tired of working for franchises that were above the crowd (Re/Max), or franchises that got it sold with green and gold(Homelife), or an almost down and out Canadian icon in real estate that had to change to a Re/Max system (Royal Lepage).  I wanted a company with identity.  I wanted a company that had a corporate feel, so I went with my own name. 

I worked for Re/max for 10 years and I needed out.  I found myself competing with other Re/max agents in the same area.  Then a light went off in my head.  Wait a minute,  the home owner did not hire me because of Re/Max? They hired me because of me?  It only made sense, because there was no other franchise competing for this one house in particular.  Wow, what a break through.  The problem with realtors they rely on franchises to do the marketing for them.  Realtors use franchises as a sales crutch!  Are we not in the marketing game? Oh, boy I really feel sorry for these home owners out there.  Nevertheless, when these agents wake up and realize there potential they switch to a non franchise.  Perhaps these independent brokerages are opening up because they feel that they can recruit agents away from franchise real estate.  I can speak from experience, all the agents I have hired came from Franchises. 

It could be that realtors are tired of franchises.  After all they are just another number in a franchise environment.  Maybe agents are looking for a firm with more identity, more corporate culture, and maybe a firm that stands out.  Maybe Realtors are tired of being “Nickel and Dimed”!  Realtors are tired of paying franchise dues, international dues, or national advertising dues.  These franchises all operate the same.  They get you in the door and nickel and dime you to death.  Realtors are tired of photocopy fees, fax fees, admin fees, website fees, coffee fees, parking fees, Christmas party fees etc.  The Franchises need to charge all of this or they can’t survive, because franchise dues are so extensive.  Here is something to ponder: I have seen more franchises go belly up than independent firms! 

Realtors may argue with me and say that the general public (i.e. sellers, buyers) want the franchise name when they list.  The Seller’s want to list with Re/Max because they advertise the most.  As they say, the easiest person to sell is a salesperson!  When Re/Max came into the industry in the early 80’s it was the agents that promoted the name to Sellers, not Re/Max.  The general public had no idea about this company.  There was a mass exodus to join Re/Max and the agents promoted this name to the general public.  It was pointed out to me by a top marketing firm in Toronto, that Re/Max advertises on TV and billboards to recruit agents, not convince homeowners to use there brand.  With all the advertising that Re/Max does, I am willing to bet that the only market Re/Max is a leader in is some suburbian neighbourhoods.  Toronto is controlled by independents, and as we all know Toronto is our leader; and what Toronto does the G.T.A follows. 

Will the Franchise Brokerage survive?  It may in the short term.  It will definitely be interesting to watch.  As for now, watch out franchises, independent brokerages are growing.  No need to look to United States, you just need to look

Posted in Franchise Real Estate, Uncategorized | Tagged | 899 Comments

CREA’S MLS….The Next Autotrader.com

Posted on December 19, 2010 by Frank Gentile--Broker of Record

Does the Canadian Real Estate Association, which owns the trademark MLS, want to move toward an auto trader setup?  This is a valid question, considering the ease in which they let the competition bureau got its way.  The latest news regarding this a la carte form of real estate takes the cake.  CREA has approached the competition Bureau with the issue of brokerages not allowing salespeople to market the a la carte menu.  Why would an organization protecting its members bring up issues for the competition bureau to investigate? What a relief the competition bureau has lost interest in this subject, and stated that they will not interfere with brokerages at this point. 

With the a la carte menu of service, agency can be averted in almost all scenarios except a couple; one of which is negotiating an offer.  Therefore, realtors can become consultants instead of agents as long as they do not negotiate an offer etc.  Of course, I write completely figuratively.  No Agency, what will RECO do?  Will they have to shut down shop. Think about it, we can consult on home sales and avert all those pesky RECO rules.

The question everyone in the real estate industry asks is what is really going on?  Who is behind these sweeping changes that want to abolish agency.  Are the banks behind this movement?  With agency out of the way, the banks can be consultants.  They would not need to set up brokerages.  They would not need to get their real estate licenses.  The Banks wiggled there way into the insurance industry.  Is real estate next on their agenda?

Whoever is behind this, the one thing for sure is that CREA has changed the face of MLS and RECO has not stepped in to protect Agency.  Perhaps CREA wants to transform the MLS into the way the auto trader operates.  Individuals can post their homes on the MLS and negotiate directly with each other.  It would save the Toronto Real Estate Board hundreds of thousands.  They would not have to put up with realtor issues, offer courses, offer free coffee and muffins etc.  The Toronto MLS can generate major money this way, and move away from the non-profit organization they are.  Of course, I am writing figuratively again.  But, something is definitely up.  You may not agree with my scenario, but I bet you agree that something is going on.  The proof is in the way CREA folded with the competition Bureau.

As far as the general Public is concerned I have one thing to say:  Caveat Emptor potential Buyers.  Just like buying a car, when you buy it, there are no guarantees or accountability from the seller.  No Agency equals no accountability.

Posted in crea and competition bureau | Tagged | 15 Comments

The Art of Negotiation is Dead

Posted on December 5, 2010 by Frank Gentile--Broker of Record

In the pioneer age of Real Estate (circa 1990’s), Real Estate Agents would receive an offer from a buyer and set up an offer presentation with the listing agent and their seller.  Yes that’s right a presentation, not a faxed offer!  In this pioneer era of real estate negotiation, a buyer agent would bring the offer to the seller’s home, and along with the listing agent would negotiate a deal satisfactory to the buyer and seller.  These pre-historic presentations would go all night to negotiate a deal. Realtors would work together to make the right deal!

 Presently I have noticed more and more listings where offers are to be faxed.  There is a break down in negotiation when faxing offers.  The Buyers agent and seller’s agent can not sit in front of a seller and plead a buyer’s case. It also allows other offers to come into play in a hot market, and although this may be great for Seller’s, what about the buyer that has to wait days to make a deal.  Other offers come in, and the buyer is left to compete with other offers; whereas if the offer had a presentation time and place, both agents could have successfully negotiated a deal the same night.

 What happened to the offer presentation?  Could it have anything to do with what listing agents are being paid in commission?  This is a valid question, because as you know you get what you pay for!  Perhaps these listing agents can not afford to sit in a house all night and make a deal.  The commissions they take do not warrant them spending the time to properly negotiate a deal.  I recently saw advertisements in a real estate magazine that showcased a total commission of 3%.  1.5% to the listing Agent and 1.5% to the selling agent.  After investigating these salespeople’s listings, I noticed that all had the verbal warning: “Please fax all offers as per seller”.  Do you really believe that the seller does not want an offer presentation?  Why wouldn’t they? It’s a chance to sell their home quickly, and see first hand what the buyer is really thinking.  I propose either these agents do not bother because of the low commission, or they lack poor presentation skills.  I would say that both arguments have validity.  Do sellers really want to hire these agents that have no presentation skills?  Do sellers want to hire these agents that can’t even sell the seller on their services?  These agents drop their commission because the easiest form of selling is dropping your price.  If these agents are discounting themselves can you imagine how they discount getting the seller top dollar?

 As an owner of a real estate brokerage, I interview and hire new sales agents.  These agents have no sales education or experience when they come out of OREA College.  OREA should teach these real estate students consultative selling techniques, instead of just collecting their money and setting them up to fail.  I would guess that the failure rate for a new real estate agent is hovering around 90% right now.  This is because OREA does not properly train in the fundamentals of selling.  At the end of the day, we are selling not typing contracts.  Consultative selling is the building of a relationship with your prospect.  It is an excellent course, and teaches presentation skills, how to market, how to sell a product etc.  OREA should come to the realization that it is not only about disclosing if you’re selling a haunted house!  Or preparing a disclosure if an agent is selling his own home!  Who cares!  Teach some fundamentals of selling.  I am not asking to produce the next Mel Lastman, but offer some fundamentals.  Every two years a realtor has to take 24 hours worth of courses to maintain their license; OREA should introduce a few consultative selling courses in the two year credit cycle.  This lack of selling technique contributes to agents not knowing how to present offers or negotiate efficiently.

 I tip my hat to those agents that allow offer presentations.  Negotiating is the real estate business.  Opening doors to homes and letting people through is for door men.  Faxing is for receptionists. New agents should not fear presenting an offer.  Presenting offers and negotiating deals is what we are paid for.

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