Are We an Apple or an Orange?

If you read some of the news articles about the recent Competition Bureau agreement with the Canadian Real Estate Association, you could truly be confused. But here are some clear facts:

1. You MUST be a licenced Realtor to post a listing on the MLS system. As a Realtor, this seems pretty simple. We all pay a lot of money to join and maintain the system. Nobody is going to say a one-time user can have my services without some strings attached.

2. Listings can be posted by a licenced Realtor without any contract for service. If you read my blog regularly, you know that I think that this is alright. It is somewhere between making your own coffee at home and Starbucks. Some people will desire this level of service. From a selfish point of view, I know that the listing salesperson cannot contract outside of the law, and may be liable, should there be a legal issue in the transaction. This will add stress to our Errors and Omissions policy costs which, in my opinion, is already too high.

3. 85% to 90% of Sellers and Buyers use a Realtor to buy or sell their most valuable asset. There is true value in the services we provide. When this MLS issue hit the press a few years ago in the US, things changed a bit for those buying and selling privately, but those 85/90 numbers did not change.

4. Prudential Grand Valley Realty is a full service brokerage.We're not interested in doing someone a favour by putting their listing on MLS as a favour to "test" the market. You're either an apple or an orange. There's no in between.

MLS and the Competition Bureau

I have been quiet publicly about all the press we have been getting over the past months on the Competition Bureau and the Canadian Real Estate Association coming to a resolve over the user rights on the MLS system. I just received a memo today about the vote that is happening on October 24th to ratify CREA's negotiation with the Competition Bureau. Here's what is going to be different after the ratification: NOTHING!

The press and for sale-by-owner spokespersons have predicted and incorrectly reported that non-realtors will soon be able to list their homes on the MLS system and that the system has been broken. This is completely untrue.
The Competition Bureau has no problem with the Three Pillars of the Canadian MLS System... The Three Pillars had said: only a Realtor could place a listing on MLS; only a listing Realtor can act as an agent for the seller of the property and assist them during the entire time of the listing contract: and a listing Realtor must agree to pay the co-operating Realtor compensation that must be more than zero.

The second pillar is the only issue that has been under discussion and being clarified. The new agreement apparently specifies that CREA and Boards/ Associations cannot prevent or discriminate against “mere postings” or against members who offer mere postings. CREA has always maintained its rules do no such thing. The new agreement recognizes that seller contact information is limited to the member-to-member portion of an MLS® System and recognizes seller contact information will not be published on REALTOR.ca. Essentially the fine print is changed, but the fundamentals remain the same.

What happens from here? The discussion has brought forward awareness to a level of service between a full service realtor and selling privately... a licenced realtor who will "post" your house on MLS but give you no service or advice. The public and the market will decide whether there is a demand for this minimal MLS service.

A good analogy I have heard is about a cup of coffee... You can make it at home in your own coffee maker relatively cheaply. You can go to McDonald's or Tim Hortons and be served for a higher price, or for a higher price yet, you can go to Starbuck's and sit on a leather couch, use their wireless internet, and read their magazines. They all have their advantages and their price.

We're betting the house that most people still want service and good solid advice.

Here's an article in the Globe and Mail from October 15th about this.

Money Lending is Tightening

The housing market in Canada is nothing like the situation in the United States. But, as time passes, more and more of the lending policies are rubbing off on us.

A couple of months ago we heard that some conventional lenders were adopting a policy of not funding student income properties.

Today I heard that a number of lenders will no longer underwrite mortgages for private sales. The reason given is the potential for fraud and other undesirable possibilities associated with private sales.

All being said, this may well be an opportunity for agents in these slow times.

Buying a Private for Sale

It happened again this week. It seems to happen in our brokerage several times a year, and it's the same story over and over again. It's just different people and different houses, but the same story.

When buyers are looking for a house, the human nature is to look at everything. Most have a real estate agent, but they look on their own, too. The internet, weekly and monthly print publications, for sale signs, and even private for sales.

When they see a house they like, and in this particular scenario, the house is usually staged to its optimum, and decorated beautifully. The buyer finds this property on their own as a private for sale. They fall in love with the house, and make a quick emotional decision to buy the house, without consulting with an agent. The asking price is too high but that's OK because they really love the house. I truly think that, in some cases, they don't even think about the price. They just want the house. (We're all guilty of that, but in most cases, it would be on much smaller ticket items.)

So, as the story goes, two or three years pass and family circumstances change and they need to sell the house. They call over an agent and, it becomes apparent that the house is not worth what they think it is worth. Often it doesn't show as well as when they bought it because they don't quite have the flair for decorating as the previous owner. They now have two choices, list it at market value and take a hit or list it proportionately high to the mistake they made when they bought it.

More often than not, they take the higher route, because it is less painful. But, of course, the house never sells. So later they reduce and take the hit. When the market was good, it sometimes seemed less dramatic because prices were going up and the property caught up to the market. It seemed that way, but the mistake was really made when they made the purchase, not later.

This brings me to my point. Why would any buyer go out and make the biggest investment of their life without a professional to guide them? Especially, when their fee is being paid by the seller! It makes absolutely no sense! There are so many things to consider when looking at a house and drafting an agreement of sale. Most buyers don't even know what to look out for. Pricing , of course, is one of the biggest issues. A salesperson can show a buyer what comparable houses in the neighbourhood have sold for recently. Do you think the seller is going to show a buyer comparable sales that show his property is $ 25,000. higher than the last comparable sale?

The Importance of Getting The Price Right

Something that happens to real estate agents on a very regular basis is the issue of getting the price right on a new listing. Sellers want to get top dollar for their property, and so do we, but sometimes the "seller's price" is over the top and totally unrealistic. Especially in this slower market, it is very important to get their price in a marketable range that will encourage showings and offers.

Here's a story that happened in our brokerage recently that demonstrates the importance of getting the price right. The seller had a country property in a good, central location. The house was really nice with many updates and recent renovations.

We gave them an asking price of $ 450,000 about 18 months ago. They felt this was low, and decided to try and sell privately for $ 699,000. Later they listed with another broker at the same price without success. Well over a year passed in the process and they did reduce the price a bit, but nothing substantial.

In the end, after 18 months of the stress of trying to sell their property, they sold it for $ 415,000. I am sure everyone was disappointed in the end.

Nobody will ever know for sure, but we're pretty confident that they could have sold it for more than that with a year's less stress.

Any agent will tell you that they don't want to take overpriced listings. You can spend thousands of dollars advertising without a realistic chance of seeing a return on your time and financial investment.

Selling Privately

I really don't know why anyone would consider selling their house privately. Seriously. There are many things in this world that I have done for myself to save money, but selling my own house would not be one of them. And, usually the seller doesn't save any money - the buyer does.

I don't do the maintenance on my car. I don't fix my own computer. Heck, I don't even wash and iron my own shirts. I hire professionals to do these things. People who have the skills, knowledge, experience, and the tools to do the job properly. That means there is very little inconvenience or headaches to me.

When I sit in the broker-manager's chair for a brokerage handling roughly 1500 transactions a year, I see some pretty strange things happen in transactions that would make your hair stand on end. Sometimes the buyers or sellers are not honest and mis-represent facts. Sometimes people change their minds when it's too late to change their mind. And, sometimes buyers have bad credit and are not qualified to buy a house and lie about it. It's a tough world out there, and if you're going to sell your property yourself, you better be as tough as the lowest common denominator.

As a buyer, what would possess you to buy a house privately? You don't have to pay the agent (the seller usually does). You don't have access to all the properties that are for sale (the agent does). And, you don't have the knowledge or experience to negotiate the deal. How do you know you're not paying too much? It makes no sense!

As a seller, hiring an agent makes perfect sense. They have access to all the information and market data to give you an accurate evaluation on your property. The agent gives you maximum exposure to the most buyers through other agents, the MLS system, the internet, print advertising, agent and public open houses, and more. And of course, a basic marketing fundamental is that maximum exposure brings you a higher price.

Of course, let's not overlook the annoyances of dealing direct with the other party. Making appointments, dealing with "no-shows", broken promises, security issues, mis-representations. Without an agent doing these things for you and acting as a go-between, your tolerance can wear a little thin.

Let's not forget that when you use an agent, you only pay for a successful sale on your terms. This is the ultimate in a customer guarantee. "If I don't produce, you don't have to pay me". If you use a private for sale marketing company (who sometimes try to make themselves look like an agent), they get paid when you buy their "package". They have absolutely no interest in whether your house sells or not. They get paid up front and then they're gone.

Sometimes you get what you pay for.

As I look around our offices, I see some pretty outstanding individuals who bend over backwards in the best interest of their clients. They work until 11 at night sometimes and often all day Saturday and Sunday. And at the end of the day, they have some pretty happy clients who would tell you in a flash that they were worth every penny they were paid. It makes me very proud to be associated with these people.