What is your current situation in the real estate market?

[TheKingEast]

I simply don't understand paying 5% to an agent when your condo can basically sell itself. If you have a condo at the Thompson that is priced competitively, how much work is that agent really going to do?

 

[James]

With this slowdown (or "soft landing" as the media likes to coin it) gradually coming into fruition, it certainly seems like many potential 1st time home buyers are cautiously waiting on the sidelines, some possibly jumping in on decent price reductions with respect to the condo market. It also seems like the number of "move up" buyers are also dwindling. Although I do see "move up" homes in desirable neighborhoods still fetching some very high numbers, the sheer volume of these transactions are quickly diminishing.

My question, I guess, since we're talking about realtors is "what changes do you see happening in the industry to balance this market shift"? Fewer active agents in general? Commissions structure modification? More value-added services? Change in marketing strategy?

 

[NotKevinBacon]

I simply don't understand paying 5% to an agent when your condo can basically sell itself. If you have a condo at the Thompson that is priced competitively, how much work is that agent really going to do?

Have you looked at the latest TREB statistics?

Or you can look at this market report: http://juliekinnear.com/blogs/toronto-real-estate-market-report-march-2013-infographic.html

Sales in March were 18.7 per cent lower than in March 2012. With the housing bubble we're having, it's even more important to have a realtor to do the job.

 

[rbt]

Have you looked at the latest TREB statistics?

...

Sales in March were 18.7 per cent lower than in March 2012. With the housing bubble we're having, it's even more important to have a realtor to do the job.

It's important to be on MLS and pay a commission to the agent representing the buyer. A real-estate lawyer is fully capable of handling the complicated bits of the listing agents job.

 

[js97]

I simply don't understand paying 5% to an agent when your condo can basically sell itself. If you have a condo at the Thompson that is priced competitively, how much work is that agent really going to do?

Agreed. Many desirable units neighbourhoods generally can sell themselves, all the agents have to do is take a few pictures to make a few grand.

On the flip side, I find many commission free listings to be generally over optimistic about their price point. There is very little incentive for a buyer to do the leg work and find these privately listed units when the prices are the same. For Com Free units to survive, it's a really tight spread of 5% they have to balance.

 

[James]

Agreed. Many desirable units neighbourhoods generally can sell themselves, all the agents have to do is take a few pictures to make a few grand.

On the flip side, I find many commission free listings to be generally over optimistic about their price point. There is very little incentive for a buyer to do the leg work and find these privately listed units when the prices are the same. For Com Free units to survive, it's a really tight spread of 5% they have to balance.

I noticed this too with the FSBOs or Com Free type of listings. The asking prices are pretty much in line with similar properties listed on MLS through the standard brokerage firms.

 

[James]

Interesting survey from BMO indicating that 57% of GTA homeowners plan to buy within the next 5 years.

http://www.thestar.com/business/rea...ners_plan_to_buy_again_within_five_years.html

Six in 10 GTA homeowners plan to buy again within five years

Sales are falling and prices are rising, but most GTA homeowners says they will buy again in the near future

By: Morgan Campbell
Business, Published on Wed May 22 2013

Real estate prices continue to rise, but a new Bank of Montreal poll says that hasn’t damaged GTA homeowners’ belief in the market.

According to research released Wednesday morning, 57 per cent of local homeowners polled plan to buy a new home within the next five years. That figure was down two per cent from last September, but 11 per cent ahead of the national average.

While the number varied widely in other cities compared with last autumn’s poll, BMO analyst Sal Guatieri says GTA homeowners’ intentions to buy in the future will hold steady for the rest of this year.

“Maybe people are sensing more stability,” says Guatieri, a senior economist with BMO Capital Markets. “I would not expect people to become more optimistic and jump into the market, but I don’t see a further fall back in sales, either.

In Vancouver and Calgary homeowners’ confidence in the future of the housing market was much more volatile.
When surveyed last fall, 53 per cent of Vancouver homeowners polled planned to buy a new home within five years, while 52 per cent of respondents in Calgary expressed the same intention. But by May, the percentage of Vancouver residents with new home plans had jumped to 58, while in Calgary that number slumped to 39 percent.

“That left us scratching our heads,” Guatieri says. “We expected the opposite because Calgary is supposed to be close to fair value. Affordability is quite good there.”

One possible explanation, Guatieri says, is that even though Vancouver remains an expensive place to buy a home, real estate prices there have begun falling, which in turn could prompt prospective home buyers to feel confident about finding a better deal in the future.

The survey, conducted for BMO by Pollara, also found that 46 per cent of homeowners under 40 planned to buy a new home within five years.

Compared to last September, respondents were also less sensitive to changes in price. The percentage of Ontario residents who said they would buy a new home remained steady, even when pollsters introduced a hypothetical five per cent price increase.

Nationwide, four per cent fewer residents said they would buy a home if prices rose five per cent. Last fall the hypothetical price hike slashed the intention to buy a home by 10 per cent.

~~~

 

[UserNameToronto]

I simply don't understand paying 5% to an agent when your condo can basically sell itself. If you have a condo at the Thompson that is priced competitively, how much work is that agent really going to do?

Let's break down that 5% figure. You're actually paying 2.5% to the buying Agent and 2.5% to the selling Agent.

Many (most? all?) would-be buyers will go through an Agent. There's no cost to the buyer because the seller pays the cost of the buying Agent. So even in a for sale by owner (FSBO) situation, if buyers approach with their own agent, you might still be obligated to pay that portion of the commission in order to close the sale.

I'd have more faith in FSBOs if I saw:
1) professional-level listings (quality photos, quality write-ups, quality marketing, quality pricing) and
2) loads of sales being completed via FSBOs. I don't know of anyone who's either bought or sold a property this way. If it is so "easy" to do, why doesn't everyone do it?

 

[Eug]

Sad but true: Most buyers' agents will not show FSBO type properties. And even if they did, you as the seller would still be paying a 2.5% commission, cuz if you're not, it's just not gonna sell to anyone with an agent. The other point is that you're pretty much guaranteed not to have a bidding war on a FSBO since the buyer pool is that much smaller. Bidding wars suck for buyers, but they're great for sellers. Both my wife's and my condos had bidding wars when sold, and both sold for well over-asking. Mine sold for roughly 5-6% more than what I was expecting (and 7% over asking), and wife's sold for 7-8% more than what I was expecting. BTW, for my property, the price I was expecting was based on the sale of a near-identical unit a couple of months prior. However, that unit sold with a seller's agent that was a family member, but structured the listing to avoid a bidding war. For some reason that agent had a fundamental dislike of bidding wars, according the sellers. I applaud him for sticking to his principles, but in truth I think he may have done my neighbours a disservice.

That said, I think these commissions need to be capped. It's ludicrous for them to expect a 2.5% + 2.5% commission on a million dollar mainstream property.

The only good news is that we're not paying 7% like some places.

P.S. A family member did get a discount on the commission for the last property we sold, but the only reason for that was because our selling agent was a family friend.

 

[James]

Do you know if that agent had to disclose that they were representing a family member? I'm under the understanding that the agents need to note this to all buyer agents.

 

[drewp]

Yes that always needs to be disclosed, in a separate agreement attached to the listing.

One issue about FSBO's is that there is a stigma attached to their listings. I don't have a problem showing FSBO's to my clients. The problem sometimes is that my clients, especially first time buyers are hesitant because they think something is wrong with the house. But if you have a homeowner who knows nothing about the market, you can get a pretty good deal. I have seen some underpriced listings, and wonder what the hell were they thinking. On the flip side I've seen many overpriced FSBO listings. I guess that happens with standard listings as well. Eug is right to say bidding wars aren't very common with FSBO's, and if you are a seasoned buyer, willing to put the time and effort, FSBO houses can be a good alternative.

 

[James]

Yes that always needs to be disclosed, in a separate agreement attached to the listing.

One issue about FSBO's is that there is a stigma attached to their listings. I don't have a problem showing FSBO's to my clients. The problem sometimes is that my clients, especially first time buyers are hesitant because they think something is wrong with the house. But if you have a homeowner who knows nothing about the market, you can get a pretty good deal. I have seen some underpriced listings, and wonder what the hell were they thinking. On the flip side I've seen many overpriced FSBO listings. I guess that happens with standard listings as well. Eug is right to say bidding wars aren't very common with FSBO's, and if you are a seasoned buyer, willing to put the time and effort, FSBO houses can be a good alternative.

Regarding representation of a family member, I'm curious as to why it needs to be disclosed to potential buyers. Is there an unfair advantage to the sellers in this scenario such that the buyers need to be made aware of it?

As noted about FSBOs, I've seen a number of FSBO listings and, for whatever reason it may be, the properties do tend to be less than desirable. I definitely haven't seen too many high-end homes sold this way.

 

[Burton Realty]

The detached market seems pretty hot to me right now. Alot of what I watch in the west end has sold over the past couple weeks. July and August are exciting times in the market. Condos seem to be moving slower.

As for the 5%... The 2.5% paid to your selling agent might seem like alot. But its very difficult to effectively sell property without a good listing agent. If you're serious about moving and turning the property into cash its the only way to do it. However if you just want to meet a bunch of strangers for fun, or you want to sell for 70% value, or you just want to test the market go FSBO or 1% agent.

 

[Swarez99]

The detached market seems pretty hot to me right now. Alot of what I watch in the west end has sold over the past couple weeks. July and August are exciting times in the market. Condos seem to be moving slower.

As for the 5%... The 2.5% paid to your selling agent might seem like alot. But its very difficult to effectively sell property without a good listing agent. If you're serious about moving and turning the property into cash its the only way to do it. However if you just want to meet a bunch of strangers for fun, or you want to sell for 70% value, or you just want to test the market go FSBO or 1% agent.

Can you cite your source that your house will sell for 70% of the value?

 

[UserNameToronto]

Can you cite your source that your house will sell for 70% of the value?

I agree, the estimate that FSBOs sell for 70% of fair market value might not be accurate. Since many FSBOs just sit there forever without selling, a more accurate estimate would be 0%