Let's Talk Real Estate - Inside A Realtor's Mind...

All the Buyer wants is, “The Best of Service” and “No Surprises”.

David Potter — Thu, 18 Jan 2007 17:52:00 GMT

That’s pretty simple... or at least seems pretty simple on the surface. However, in the world of Real Estate Sales, things are often much more complicated, or perhaps less obvious than we would all prefer.

In Nova Scotia, in any real estate transaction in which a licensed Realtor is involved, you are either:

a client (the Realtor has a duty to serve your interests) or,
a customer (think ‘giant retailer’ associate).

In dealing with a buyer customer, a Realtor cannot:

provide information relating to the sellers motivation to sell, or any other information the seller has provided, that the seller could consider to be confidential,
offer advice with respect to price or other terms of an offer to purchase,
offer advice relating to competing properties that could be seen as equal or better in any respect,
disclose any other information that would harm or weaken the sellers position in negotiating the sale of their property.

If I were buying a property in community for which I do not hold a real estate license I would use a licensed Realtor and I would insist on a client type relationship.

I would only accept a customer relationship if I knew more about the property than both the seller and the seller’s agent combined, and, my lawyer was better at real estate than their lawyers. And even if that were the case, for negotiating purposes, I would likely have an interest in identifying a) comparable sales, b) other properties currently on the market and, in having assistance in interpreting that information.

—

The worst surprise would be to discover that you were actually a customer and that no one had pointed out the implications, or worse, gave you some reason to believe that you enjoyed some or all the benefits of a “client” relationship.

The danger for a Realtor is that in answering a routine question for a buyer, they could establish the impression of an agency relationship with the buyer and in the process, breach their duty to a seller.

In Canada, most jurisdictions are emphasizing and focusing attention on specific disclosure of the relationship (Representative Capacity) and at the national level the industry has established standards with respect to

• when the disclosure is made,
• the completeness of the disclosure (to avoid misunderstanding), and
• what does, and does not, trigger the need for disclosure.

The national standard has offered the view that, “Essentially, the triggering event hinges on whether confidential information has or may be inadvertently shared.” It should be remembered that the nature of “confidential” is viewed from the perspective of the consumer who is the principal in an agency agreement, typically the seller (by virtue of a listing agreement) or the buyer (if a Buyer Agency agreement exists). In the event of a dispute the matter will be adjudicated by the courts or an industry regulatory body.

When I started in Real Estate in the 1980's it was a kinder, gentler time (or seems that way now... ;-) We were conscious of acting in the best interests of the seller but at the same time tried to practice "Do unto others, as you would have them do unto you."

For a time, (some years ago) the Real Estate Industry used “Limited Dual Agency” agreements in an attempt to resolve the problems associated with the competing interests of buyers and sellers. Limited Dual Agency was reviewed by the courts (2001) and “According to the Judge, the notion of dual agency was untenable, as there was no way that the agent could meet the obligations of representing competing interests.”

Now, the Real Estate industry in Nova Scotia has moved firmly towards a much better solution to meeting the requirements and competing interests of buyers and sellers.

The Buyer Agency Agreement is the key element in this solution!

The Buyer Agency Agreement acknowledges the client relationship, and details the duties and obligations the agent and buyer owe each other.

Remember that part about things being pretty simple?

What happens when two unrelated buyer clients who are using the same agent are also both potentially interested in the same property?

While this is more likely to occur in a strong real estate market, and with income properties or condominiums, it could occur for any buyer and might also find several purchasers working with the same agent in competition for the same property.

While the agency agreement that was signed first has some priority this is a question that you should put to your agent. The most important thing is for each buyer to know where they stand.

In the Halifax area of Nova Scotia call me at: (902) 877-7654 or contact me by email

If you leave a comment, please indicate your City/State/Province

Thanks for visiting!

"Buyers Are Liars..."

David Potter — Sat, 13 Jan 2007 08:56:00 GMT

Ouch! However, behind closed office doors, this is one of the axioms that managers and experienced agents use to console and explain the disappointment which most agents have experienced dealing with home buyers.

That disappointment has very basic roots, and although it can usually be avoided, it very often colours the experience of real estate agents - and may continue to colour the approach they use with prospective buyers for their entire career.

---

Very early in my career I experienced one of those disappointments myself. I invested several days working to identify properties that matched the requirement of a couple who were relocating here, to the Halifax area. I met them at the airport, drove them to their hotel, picked them up later and we spent the day looking at homes that were a good match, in good condition, and offered good value.

I dropped them back at their hotel and they said they would discuss the homes we had seen and call me back after dinner.

I didn't hear back from them that evening and I was not able to reach them until the next afternoon when they informed me that they they had an accepted offer on another house.

You could say I was surprised... ;-)

- - -

It turned out that they had gone to dinner with friends, and had a wonderful time. Their friends mentioned that there was a nice home for sale around the corner, their friends knew the owners and suggested they all take a walk over.... They liked it, they called the listing agent, they made an offer to purchase - and, by breakfast, they had an accepted offer.

The fact that the house was 15 miles from where they had originally wanted to buy was no longer an issue....

- - -

Once my disappointment had diminished I realized two things:

1) we had started with a clear idea of what they would like to buy but they had changed their mind as their view of the community evolved. Their various concerns about commuting, etc. had been resolved.

Like most purchasers, they were exploring the market. They had used their original 'requirements' as a starting point... and had come to revise their requirements. Nearly 20 years later, the realization that they had not lied to me has been enormous. This still colors my approach to purchasers in the most positive way. And,

2) they knew how much work I had done and felt very bad that it had not worked out for me, but they were very happy for themselves.

I also came to appreciate the "pull" that family and friends can have. Now I ask, "Do you have friends or family living in this area? Where? And, would you like me to look for something suitable in that area?"

Changing our mind is something we all do. As a Realtor, my best role is to allow, even encourage those changes to take place, to facilitate your search. The best use of my experience and market knowledge is as leverage when considering the most sensible route for this specific journey, and to interpret and provide context for purchasers such as you. That exploration begins here.

OK, I've seen the Competition...

David Potter — Mon, 08 Jan 2007 15:34:00 GMT

...what, (as a seller) should I do now? - (this post in a followup to Attention Sellers..!!!)

Let me assume that your property has real competition in the marketplace. I believe that you and your Realtor should do everything possible to make your property the one that other sellers are trying to compete with. We're working to put the old shoe on someone else's foot.

Let's eliminate the distractions. Starting with the big three:

dirt,
trash,
clutter

Dirt, mould, mildew, and odors will completely kill 80% of all potential sales. Another 19% will make you an offer that will insult you. The other 1% probably can't afford to buy your property. Tobacco smoke (including odor trapped in drapes, furniture and carpets), pet odours, food smells (including compost, and fermenting wine or beer), etc., etc., etc!!!

Trash will reduce the potential selling price by 30-50%. Get rid of it - period, exclamation mark!

Clutter will reduce the selling price by 15-25%. Sort it, pack it up, get it completely out of sight - not just moved to the garage or basement. Prospective buyers look in the closets, and the basement, and the garage, and often the attic... full closets make the house look/seem smaller.

Even if it doesn't look bad to you, if your Realtor has mentioned any of these items, right now is the time to resolve them.

Next let's look at maintenance issues which represent another significant distraction. Your property could be in the best neighborhood, and be a perfect match for the buyer in all respects - but when they pull a curtain aside and find a cracked or broken window, they start wondering what else is wrong... and when they find three things they start to think about other properties.

Deal with ANY maintenance issues that you possibly can. Although you are sure you could resolve all maintenance issues for $5,000.00, a purchaser will be less certain and will discount the value of your property by at least $15,000.00. Saying you will fix something doesn't really count for much - having it fixed does.

Modernization

There is no question that you can increase the value of your property by modernizing and doing upgrades. In my experience the benefit depends upon:

correcting any problems that exist,
using materials,styles, colours that are in demand
selecting the 'right' project...

Don't Ignore Problems - Simply re-doing a bathroom or kitchen will be a disappointment if problems relating to functionality are not resolved. Awkward locations for appliances/fixtures, doors, closets, or even windows will still detract from the property and may not give the property the desired appeal.

Style - Redoing the property in your favourite colours can be equally disappointing. I would consider consulting at least three suppliers about colours and appropriate materials - AND visiting a good number of model homes/suites to see what the competition thinks is hot.

The 'Right' Project - Generally speaking, Buyers expect a property to have a good roof, good windows, and appropriate electrical/plumbing/heating systems. While buyers place value on these types of projects, they expect them and most buyers don't tend to value these projects as highly as most sellers would hope.

The right project for your property might be something entirely different. Check the local real estate advertising to see what features are being trumpeted.

Talk to me... I am very interested in your observations in this area I would like to know what you've seen work (or not work).

Attention Sellers - Get Involved!!!

David Potter — Mon, 08 Jan 2007 12:58:00 GMT

Yesterday I spoke to one of the regular vendor's at the Sunday 'Flea Market'. He has his home on the market, he's getting very little activity, but he has a good relationship with his Realtor. He wants to sell (motivated) but not desperate (doesn't want to reduce the price unnecessarily).

What can he (the seller) do to help?

My suggestion is for him to talk to his Realtor and arrange to view the competition. Not just properties that are similar or in the same price range - but THE COMPETITION - the properties that his agent considers to be the most significant competition.

If your property is not getting much activity... (usually measured in VIEWINGS) your agent should have a good sense of who you're competing with for the Buyer's attention. Realtors watch the new and sold listings, we talk to other agents, we're interested in the market.

Now I wouldn't expect your agent to know what had been listed or sold in the last 24 hours but in most cases they should be able to offer a good summary of the competition at any time and be able to accommodate a request to view the real competition within a couple of days.

What are you looking for?

At minimum, you want to know what you can, should or need to do to move your property into the top three on the list. You might still have to wait for the other two to sell... but you should be seeing as much activity as the competition.

If you think that the properties your agent shows are not really in competition with your property then it's time for a real heart to heart with your agent ...and don't expect to get the real results you want if you do all the talking. See: Mismatched Expectations

Coming soon, "OK, I've seen the Competition..."

A Deer in the Headlights...

David Potter — Mon, 08 Jan 2007 01:37:00 GMT

When a property owner only wants to talk about price, two things happen. First they let the Realtor off the hook with respect to all the other service issues, and second, they run a significant risk of placing their largest asset in the hands of someone who understands more about basic human psychology than real estate.

Don't get me wrong, in seventeen years in Real Estate Sales price has almost always been the most important concern of the seller. The times when it hasn't have been when a) there was a requirement for the sale to be concluded in a short time period and b) occasionally when the property was part of an estate and the family wished the property to go to a young couple or some other purchaser who would appreciate the property the way they had themselves.

If all you want to talk about is price, some agents will simply agree to the price you have in mind, or "overbid" their competitors. While this can happen in any market it is more common in a "hot" market because there is a good chance that if you wait a few months, the market will build into your price, or the agent expects that you will grow tired of waiting and they can convince you to reduce the price to a reasonable level.

It always makes me shudder when I hear that a agent asked a seller how much they wanted and then listed the property a little higher, "To allow room to negotiate."

Don't be a deer in the headlights. Make your best effort to find a Realtor who has built their business on all the important parts of Real Estate Practice - not just promising everyone the highest price and seeing who bites.

Coming up, "What Can a Seller Do?

Mismatched Expectations...

David Potter — Fri, 05 Jan 2007 19:29:00 GMT

Just before Christmas I dropped in on an "Open House" another Agent/Company was holding. The agent is a very successful agent with several years experience who I know quite well. She is not only successful, she is a very good agent, an agent that I would choose to represent me if I had the requirement.

When I asked how things were going she said "Good". Agents often remind me of fishermen..., "Not much today, try over there (...Way over there)". She went on to add that she was carring a few more listings that she would like. I thought about her comment this morning while burning off Christmas calories at the gym.

The only reason. THE ONLY REASON an agent would say that is because the expectations of the property owner(s) and the agent are not in sync with the reality of the market. And the agent is not confident that the property owner is listening and trusts the agent well enough to do what needs to be done to sell the property.

"What needs to be done" might be making the house show better, removing distractions, making some improvement, or a price reduction. Whatever it is you can be sure that agent raised the matter with the property owner, and the owner didn't hear the message - or heard it and said "No".

Any good agent will raise the matter again.

If you don't trust your agent get a new agent, if you do have that trust, my advice is act on your agent's advice.

Next, "A Deer in the Headlights"