In hot real estate markets, realtors are going to make you an offer – whether you want it or not
Garry Marr
The Vancouver Sun
It will probably look like a real offer for your home. You might see your name and address on what seems like a contract, complete with a purchase price — even though you’re not thinking about selling.
With listings in short supply and real estate agents dealing with clients trying to break into the market, the number of unsolicited offers is probably going to just keep growing in hot markets like Toronto and Vancouver.
Think of the unsolicited offer as the ultimate bully bid: You don’t even have a for sale sign up but someone out there is trying to move you out of house and home.
“People in the trade of real estate on a full-time basis, this is one of the ways they mine for leads. They solicit high desired, high demand neighbourhoods,” says Kelvin Kucey, deputy registrar of regulatory compliance with the Real Estate Council of Ontario, which regulates the industry in this province.
There is nothing illegal about realtors directly approaching you to sell your home privately, he says. But that doesn’t mean all homeowners appreciate the attention: Kucey says his agency handles about 25 to 30 calls a month from people complaining about the practice.
Personal declaration here: I get requests, including private offers, every week where I live in Toronto. Sabrina Kaufman, vice-president and saleswoman with Slavens & Associates, sent me an unsolicited expression of interest this week — a tactic she says is driving about 40 per cent of her business today. Her pitch didn’t offer a price, just a “Dear Homeowner” letter, advising my wife and I that a client wants to buy a property in the neighbourhood.
“I have found sellers (say yes to the offer) because they have a price in mind that they are comfortable with and, if they can avoid the process of selling, they will,” Kaufman says.
With prices up about 16 per cent in Toronto and 32 per cent Vancouver on a year-over-year basis, it’s easy to be overwhelmed by any offer. New home builders in the Toronto area said Friday that prices hit record levels at the end of June. If ever there was a seller’s market, this is it — meaning you could be leaving money on the table by not exposing your home to more than one bidder.
Kaufman doesn’t want to reveal the other strategies she uses to find product off the Multiple Listings Service system for competitive reasons, but she clearly feels going outside the established system is the only way to move forward in this tight real estate market. Toronto builders said across the the entire region they only had a 1,000 new detached homes for sale left at the end of June, compared with more than 10,000 homes for sale a decade ago.
“I’m not someone who is going to sit around and wait for product to come to me. My buyer list will just continue to grow,” Kaufman says. “Buyers are frustrated and want results. More and more agents have to go off market. You go into an offer presentation and five other people are there.”
While unsolicited offers may pay off for buyers, the real problem, as a seller, is it’s incumbent on you to determine fair market value for you property. The agent making the offer is just not on your side. Some provinces, like Ontario, still allow dual agency deals, where an agent represents both parties on a deal as long as the conflict is disclosed.
For her part, Kaufman says she doesn’t believe in dual agency agreements. Although she may present an offer, she says the sellers must represent themselves in the transaction.
“There’s a convenience and privacy thing,” she says.
Risks aside, there are some advantages to selling directly and bypassing the MLS, which usually requires posting pictures of the inside and outside of your house online, which can lead to privacy concerns for some.
“You don’t have to worry about an open house, the neighbours having a look and all the disruption,” Kucey says of the benefits of a private sale.
On the financial front, agents soliciting business usually promise a break on commission, about five per cent of the purchase price in Ontario. The seller traditionally pays, and on a million-dollar home — an increasingly common price point in the market in and around Toronto — that’s $50,000.
The flip side to selling privately and saving that commission is access to the MLS system and potential buyers who are likely to drive the up the price. Canadian real estate employs a blind bidding process where multiple buyers have no idea what anybody else is willing to pay, and that creates bidding wars and inflated prices.
A side issue to accepting an unsolicited offer is someone buying your home privately and assigning the contract to a third party — at a profit — before your deal closes. But should that really matter, if you got fair market value?
National real estate prices went up 2.3 per cent in June from May, according to the Teranet and National Bank of Canada House Price Index. In this market, it’s not hard to imagine a property that sold for $1 million being worth $1.1 million six months down the road, but if someone flips that same property for $1.5 million that’s a pretty clear sign the vendor sold for less than market value — prices are not generally rising 50 per cent every six months in any submarkets.
Peter Norman, chief economist with Altus Group, says that during a shortage of listings realtors get a little more aggressive trying to seek out sellers.
“I would think people at that stage, willing to sell their house, will take the effort to find an agent and get it listed. You might be able to short circuit the system a little bit,” says Norman, referring to a private transaction.
Brad Henderson, chief executive of Sotheby’s International Canada, says agents in Toronto and Vancouver are now taking real signed offers to houses, subject to conditions.
“I’d say it’s more the exception than the rule,” Henderson says, adding that nobody is making unsolicited offers at his firm. “I just don’t think it’s an optimal strategy for the seller.”
Sellers really need to do their homework before agreeing to a private transaction — don’t get tricked into a quick timeline, warns real estate lawyer Barry Fish. He also suggests sellers request a large deposit of as much as 10 per cent.
His advice, after 43 years as a lawyer is clear: “If it’s not MLS, you are rolling the dice.”
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