5 tricks realtors use to get more for their homes!

Figured it’s high time to move to clickbait post titles.

The idea that realtors sell their own homes for a few percent more than those of their clients has been well published.  Most famously it was featured in Freakonomics, where the authors made the point that realtors shortchange sellers by pushing for a quicker sale rather than holding out for the best price.

The key figures from the book being that realtors sell their own homes for an average of 3% more than comparables and they leave them on the market for 10 days longer.   The theory being that the discrepancy is due to mismatched incentives causing the realtor not to act in the best interests of the seller.

Of course realtors aren’t too fond of that theory, so they have offered ones of their own to explain the higher sale prices for their own homes. In short, realtors may take more care to:

  1. buy homes that are attractive to a wider group of potential buyers,
  2. choose renovations and updates that have a higher impact on resale,
  3. time a sale for better market conditions, or wait for the spring selling season,
  4. price appropriately for the market and,
  5. take a gamble by holding out for better offers.

There’s your promised 5 “tricks”, and you didn’t even have to page through a slideshow to read them.

But where is this data really from?   It seems the paper all this is based on is “Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions” by Steven Levitt (note: author of Freakonomics) and Chad Syverson.   They looked at 100,000 property sales near Chicago from 1992 to 2002 and compared the 3300 that had been realtor-owned to the rest.     Note they also discussed the likelyhood of the arguments above as the cause for the sale price discrepancy and found them unconvincing.

Levitt and Syverson propose that the degree of informational advantage that realtors have over others determines the amount of additional money they can get when selling their own house.   They found that in neighbourhoods where the housing stock is the most diverse, realtors got 4.3% more for their own homes, while in homogenous neighbourhoods where houses can be more easily compared they only got an extra 2.3%.

Interestingly, they also saw a trend of decreasing premiums over time, with realtors selling their own homes for an average of 5% more between 1992 and 1995, while the premium was only 2.9% 10 years later.   They believe that the increasing information availability from the Internet contributed to this decline in the advantage that realtors posses.

So 10 years on, with vastly more information available to sellers and buyers online than ever before, can realtors still obtain higher prices for their own properties?    How could contracts be structured to avoid realtors being incentivized to shortchange sellers?

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70 thoughts on “5 tricks realtors use to get more for their homes!

  1. You might be right. One thing I’m concerned about is the sale of the park for redevelopment purposes. What if she lives there and in five years this occurs – almost the entire investment is gone as I doubt there is strong value in the unit itself – and who knows if it actually could be moved, but perhaps I’m wrong. Maybe there is an agreement not to redevelop because without it I can see it happening on these lands given the location in the next 5-15 years.

  2. One would think that prices are set by competition as with anything else. There is limited stock of MHs out there, and they are one of the few very low cost free standing options. I don’t see why their price should not be influenced by demand and the greater market. If condo prices suddenly doubled I would expect MHs to be dragged upwards as well (in a more limited percentage most likely)

  3. Thanks again. She’s not 55 yet – late 40s no kids but cats and no reasonable prospect of ever working again. I think the other park is out as an option due to the age restriction but it looks much nicer. If I look at the past sold prices it does appear that these units are selling for more today than, say, three years ago. How is this possible if the mobiles are depreciating assets and the land is not owned? Have you encountered appreciation in the units when appraising and looking a the sold prices?

  4. I’ve appraised many of the manufactured homes in this park. From the listing it looks pretty good. You should compare this unit to other double wide manufactured homes in the park on a price per square foot basis excluding additions. As the additions tend to be handyman quality. Then rank them by condition.

    I don’t think you’ll ever see any startling appreciation in these homes. Manufactured homes are constructed to a higher standard than stick frame homes because they have to be moved by a trailer to the site. There is another modular home parks that you may want to take a look at along Lekwammen. None are up for sale at the moment and they are more costly but the earthquake construction is impressive.

  5. The park can be privately owned or on First Nation’s land. The two types of parks are assessed differently and taxed differently too. An issue for some banks is the ability for the bank to seize assets on Native Land if the mortgage goes into default.

  6. It isn’t straight line depreciation at 5%. The depreciation used is observed condition. If a 1975 built manufactured home has been updated to 2000 standards then the remaining economic life could be 30 years or more.

    The remaining economic life of the manufactured home must be 5 years more than the amortization. Physical life is NOT the same as economic life.

    If a manufactured home cost $200,000 to construct and the current market value is $150,000 then the property has 200,000-150,000/200,000 or 25% depreciation.

    If the economic life of a manufactured homes is 55 years and has 25% depreciation then the remaining economic life would be 55 x (1-0.25) = 41.25 years. Since this is more than 25 year amortization plus 5 years the bank will grant a chattel mortgage.

    If the remaining economic life is say 20 years then the amortization would be shortened to a maximum of 15 years.

    You can see how it becomes more difficult to get a chattel mortgage on older manufactured homes. And that’s why they don’t appreciate like leasehold condominiums or strata units or single family homes. The homes value is tied to the ability to obtain financing.

    Sometimes there is a value to the leasehold pad when the pad rental rate is below market rent. That isn’t the case anymore in Victoria. In fact if the pad rental rate is too high then it will cause the home to have a higher rate of accrued depreciation from all sources and a lower remaining economic life.

    And the manufactured park plays a role since there is a ranking system for the park depending on amenities and cleanliness.

    The manufactured home also has to be anchored to the pads with steel cables or straps. It also has to be registered. The MH Registry number will be on the electrical panel and on a small exterior plate on the siding and will appear on the Title to the home. Since the manufactured home is security for the loan the bank doesn’t want the home hooked up to a truck and hauled away in the middle of the night. In truth most of these homes are far from being mobile with all the additions and decks affixed to them.

    All manufactured home parks seem to have age restrictions that could mean you may not get a high ratio mortgage from CMHC since CMHC is not suppose to lend on properties that discriminate on age. However, they often do anyway.

    Not all manufactured homes are on leased land or month to month rental pads. There are parks where you own the land and the manufactured homes in these parks are the most expensive ones to buy into.

    Try Scotiabank or BMO if you need to get a mortgage on a manufactured home. Coast Capital might still lend on them too. Try to find a loans officer over 40 years old as they may be more familiar with uncommon loans such as chattel mortgages. Better to try those banks near the parks as they will have the most experience on unconventional mortgages. Not all lenders will lend on manufactured homes.

    If the manufactured home is clean, well kept and has no immediate repairs necessary to the roof, exterior or mechanics it will generally have a remaining economic life of 30 years. And if the park is well maintained with curbs, street lights, etc I doubt you’ll have problems unless you get a real arse of a loans officer. Then just ask for his/her manager. Sometimes the branch has to get approval from Vancouver to make the loan.

    There ya go – easy as pie

  7. Also, 1975 like the one you linked Leo and you are probably going to run into component failure problems according to google (leaks, floor rot, mold). She’d be looking for something 1990 and above.

  8. I can’t figure out how long they last either. Seems like there is difference between eras of manufacturing, manufacturers, and modular vs. mobile homes in the US anyway. Also seems to depend on maintenance.

    This is definitely the cheapest option for her if they last long enough and don’t depreciate too fast at this price. If there is a reason to check into it further I’ll probably have to go down and talk to other owners to get a better take on things.

  9. What is that based on – the depreciation? That is the part that I can’t figure out. Online some sites say 5% per year but then I don’t understand how a 25 year old modular home can still be worth in the $150,000 when it is on leased land. Are there other factors that weigh against it because the pros are cats are allowed and she gets a garden area attached and can drive to her door which is helpful for her. Plus the interior is nice and 2 bed 2 bath and overall, not counting depreciation or repairs, it is cheaper than renting.

  10. I have a disabled family member with cats and a very limited budget wanting to relocate to Victoria. She is looking at mobile homes among other things. Seems like she can get something around 150k and $325 a month pad rent in an adult park. I don’t know anything about this market other than these homes depreciate (ones she is looking at are built in the 90s). Does anyone have an opinion on pros and cons of these types of housing and how much further the home will depreciate each year if maintained? I think this is likely the only type of housing she can afford and the other choices are rent or stay put where she is. Thanks!

  11. Ontario cracked down on it this year. http://www.ctvnews.ca/business/phantom-bids-targeted-in-new-ontario-real-estate-rules-1.2422776

    “As of July 1, agents will not be allowed to imply they have received an offer unless it is in writing and has been signed. They will also be required to keep records of all of the offers they have received on file for one year.
    Buyers who suspect they may have been duped will be able to find out whether there truly were other offers by filing a complaint with the Real Estate Council of Ontario, the agency tasked with enforcing the new rules.”

    Very sensible

  12. Legislation that would entitle the winning bidder to see the names and bids of all participants might be a step towards showing the public that she does care.

    Privacy concern in my opinion. Winning bid should be giving a list of realtors/brokerages that are submitting an offer.

    For example,

    Listing realtor: “Offers are to be submitted by 4:30 pm Tuesday. As it stands currently we have three written offers; Bob from ABC Realty, Suzy from 14% Realty, and John form Re/Dux.”

    If there was a concern with the process the winning bid could call the managing brokers from ABC Realty, 14% Realty, and Re/Dux to confirm that those realtors in fact submitted offers.

  13. I agree that claims go up in down market as parties try to ditch contracts/mitigate loses. Just saying usually you don’t see the argument as “I paid too much,” it is spun off in some other context (lack of disclosure, etc).

  14. There have been documented cases of offers being fabricated to put pressure on buyers.

    I think this should be automatic grounds for termination of real estate licence.

    That being said hot market + insane flow of information = more legit multiple offer situations than we’ve seen historically.

  15. It’s all about the money. If you paid over market value there must be a reason. Someone must have been at fault. Now you just have to go looking for the reason. You thought the home was bigger? It really wouldn’t be an issue if you hadn’t lost money.

  16. Most of these cases a lawyer will just turn down.

    And then the plaintiff acts as their own lawyer. Which I think is a mistake because the judge will allow the plaintiff to ask questions that would not normally be permissible because of their lack of knowledge of court proceedings. And in fairness the judge has to allow the lawyer for the other side, who earns $600 an hour, the same leniency in asking questions of the witnesses. And for any lawyer that’s like shooting ducks in a barrel.

    I have been to court several times where the plaintiff feels they have over paid for a property. All court cases are about money. The plaintiffs are not suing for overpaying they are suing for missrepresentation, an error an omission that caused them to overpay. They want to be compensated for that over payment. If they can can show that the agent had knowledge that the next condo tower to be built would block their view and the agent didn’t tell them then I think they might have a good case. I’m brought in to assist in determining the amount of loss from that sub penthouse’s partially blocked ocean view.

    And just this month I had a consultation with an older retired couple that bought a condo three years ago and felt they overpaid because of verbal representations the real estate agent made to them about the property. They were not necessarily going to take this to court. They thought that they could get some form of compensation from the real estate board.

    I don’t give a legal opinion. I just explain what type of appraisal report is needed and I give them several names of lawyers that handle such cases for them to talk to.

    I understand that people are responsible for their own actions. But sometimes an agent may unintentionally cross the line in order to make a sale. And I think auctions are one of those grey areas. There is already a precedent set by developers with a 7 day cooling off period. Auctions are a different marketing condition than the normal orderly liquidation of property and I think there is a legitimate argument that auctions should be treated in the same manner as sales from condo developers.

    The crazy prices of bidding wars underscores the premise that something should be done. It may be a good idea for the real estate boards to regulate this activity themselves before the government steps in and does it for them. And we all know how well that turns out when the government tries to solve a problem.

  17. Claims are one thing, claims over having “paid too much,” is another thing.

    Claims are more like “my realtor never advised me to scan for a buried oil tank,” when he or she ought to have known that the home would be at very high risk for a buried oil tank.

  18. A recent audit of the REEOIC revealed some interesting facts. While claims have risen with record sales, the rate of claims has remained fairly constant, at approximately three claims per 1,000 residential sales in BC. In the mid-90s the rate was about six claims per thousand.

  19. Specific performance is a pretty straight-forward remedy where there is a written contract. You aren’t going to be tied up in court for ten years. However, it is probably not worth the stress and delay unless the claim is over $50,000 and they person you are suing has assets. If the deposit is 10% you are probably going to be adequately compensated unless it is a sharply falling market. You are right it is better to just keep a deposit and relist.

  20. The Premier is under a lot of pressure these days to make real estate transactions transparent.

    Legislation that would entitle the winning bidder to see the names and bids of all participants might be a step towards showing the public that she does care.

    Not really a big thing when you think about it. The agent has the offers on his desk anyway. Certainly will go a long way to discourage phantom offers and show that it is not all foreigners buying up real estate in BC making our prices high.

    Christy are you listening? This could be a get out of jail free card on this issue. We could even name this piece of legislation after Marko.

  21. I didn’t hear of any law suits against REALTORS® resulting from the 2010-2013 correction we had in particular the Western Communities. Sooke and condos in Langford took a large beating during that time.

    Not sure I buy the theory that REALTORS® would get sued if the market corrected.

    At the end of the day the magnitude of our appreciation this year is really not that much if you peg it from 2007 – prices are maybe up 10-12% over 8 years? Other markets are up over 50% during the same time span (like Toronto).

    Market has picked up but a 500k 2007 home is not going for 750k.

  22. There are 900 Civics listed on Canadatrader.com in BC….no way I am paying a couple of hundred extra.

    You know what I mean. In the grand scheme of things, if the house is perfect you’re probably OK to go a bit higher to get it in the case of a hot competition. Not outside of what you could afford, but if there is strong competition then clearly the market value is higher than you may have initially judged it.

    As for offers, as long as the info is accurate, that’s great. There have been documented cases of offers being fabricated to put pressure on buyers. Quite possible that most of the suspicious stories one hears about offers suddenly materializing are in fact true offers and it just looks weird from the buyer’s perspective.

  23. The same with mortgage brokers. Your likely to get a better mortgage deal if you pay the broker personally upfront rather than when they get paid by the bank. The broker is only going to shop your mortgage to banks that pay them. The bigger the mortgage and the more favorable terms for the bank the bigger the pay day for the broker.

  24. You can certainly bring out the big gun of a law suit for specific performance. If you’re are going to do that then the damages should be large or you want to sue on principle.

    I’m not suggesting you do this but it worked out for someone I know that was threatened with a similar law suit. He told the person to go ahead and sue him. That he would keep them in court for the next ten years and they will have to pay their attorney for all that time. Or – they can sell him the property at the reduced price of X. They took the deal and this was for real estate valued in the millions.

    If you’re are going to draw the threat of a law suit like a gun from a holster – then you better be willing to pull the trigger. Because most knowledgeable buyers will know you’re bluffing. The other problem is trying to get a lawyer to take the case without a retainer.

    Like developers threatening purchasers from other countries for performance. It rarely happens because it’s too difficult and too expensive to sue someone in another country. Far easier just to resell the property and chalk it up to experience.

  25. And it is not just the deposit you can keep JJ. You can sue for specific performance – meaning you force the sale to go through or sue for the loss you incurred if you resell for less. There is a lot at stake with an unconditional offer.

    Odd that realtors would object to requiring access for an appraiser for mortgage purposes. Seems like a normal part of the business transaction to me whether or not the offer is unconditional.

  26. “The only compensation to the home owner is the non refundable deposit.” Seems adequate to me. Easy money in a seller’s market. Not sure if I’d even feel comfortable keeping it if I didn’t have a loss.

    I have no problem with a process that has offers open for a specific period of time. Seems like a normal part of a seller’s market to me and not unfair.

    I do have a problem if a realtor manufactures an offer to create pressure to close. I suspect this is already prohibited under the code of conduct.

    I also disagree with the % commission. House prices skyrocket and realtor expenses don’t. I much prefer the flat fee mere listing or paying for services as Marko proposed. I can’t believe the flat fee hasn’t been more popular.

  27. When it comes to auctions what I’m suggesting is a level playing field for all parties. You are free to remove the implied conditions after you inked the deal but that condition removal may not form part of the contract to purchase.

    And a selling agent can still take back up offers that can run concurrently with the accepted offer.

    Just because you have an accepted offer with no conditions doesn’t guarantee that the deal will close. If a buyer can not get the financing then the seller doesn’t get a cheque irregardless of whether there was or was not a conditional offer. The only compensation to the home owner is the non refundable deposit. If you want to stop “tire kickers” get a larger deposit.

    Many a time I have called up a listing agent to explain that I will need access for the mortgage for XYZ. The agent is astonished as it was a non conditional offer. Then I have to explain to the agent that when it comes closing day your client will be standing there with the keys but the buyer won’t have a cheque to give to them and that his failure to provide access may be grounds to have the deposit returned. If the agent still denies access the next call he’ll receive is from the bank or the bank’s attorney.

    I suspect the legal assistants and attorneys enjoy reading the riot act to the agent because they get so pumped when I tell them that the agent denied access. I get a call 20 minutes later from the agent saying “what about seeing the property this afternoon?”

    I also get calls from selling agents that want to lift the subject to financing conditions because of short subject removal times such as a 48 hour clause. I am not party to the contract to purchase and I can not advise anyone to lift the subject removals even if the property were to appraise at or more than the accepted offer as the appraisal only forms a part of the financing condition. Only the purchaser can lift the financing conditions. The agent may advise them to do so before the bank gives them approval. But then the agent would be liable if the financing subsequently fell through. The best solution would be that every purchase would have a mandatory 7 business day subject to financing removal clause that would allow the lender, credit companies, appraisers and attorneys to complete their due diligence to fund the purchase.

    And I hate to be cynical but it seems that every time the heat is put on to speed up the process there is some problem with the sale. For me that means extra non billable time spent cross and re-cross checking data turning an 8 hour day into a 14.

    At this point everything is pretty rosy for estate agents. But when the market takes a downturn and people start losing money they will be after the estate agents and suing them or trying to get some compensation for diminutive value from the Board. In the past my opinion was that the no one was holding a gun to their head to sign the contract. However, today the agents are extremely well trained in bargaining tactics and I feel that some agents may be pushing too hard and putting prospective purchasers under excessive duress. There is a normal amount of stress in buying a property under normal marketing conditions. Intentional creating an auction by under listing the property and opening offers at prescribed time is playing on that stressful situation – and may be this hard sell tactic is going too far.

    Inevitably in the next downturn there will be purchasers wanting to sue the agents because they were caught up in an auction. Because when prices fall it is hard for buyers to accept that they could have been so stupid to bid that much for a property. They have to blame someone else – and that usually is the agent.

  28. There are 900 Civics listed on Canadatrader.com in BC….no way I am paying a couple of hundred extra.

    Dropping the “hints” is a tough one. There were many situations this year, due to the hot nature of the market, where I would list a home in the core, we would get 5 to 10 showings the first day on market, 3 or 4 realtors would phone and say “My clients are really interested, they want to think it over tonight, please let me know if you receive any offers.”

    We get an offer that night, I call back the other realtors and by the next day at noon with have three offers, for example.

    What do I tell the realtor submitting the offer the night of the listing? “Don’t worry, there is no chance of multiple offers because I don’t have any written offers?” Or “realistically there could be multiples on this property given the feedback/interest”?

    I had a listing earlier this year where after 60 days on market (no price adjustment) on the 60th day we received two offers within 60 minutes of each other. Both buyers probably thought, “give me a break, no way,” but that is just how it unfolded.

    When representing buyers I just tell the listing agent, “here is my clients’ offer and only call me if you receive another offer in writing.”

  29. If you really wanted that civic and it took a couple extra hundred because of competition it would be reasonable to do that.

    As for offering what people are comfortable in the context of market value, the buyers set the market value. An individual buyer really has no way of knowing market value more accurately than $10-$20k or so.
    There’s a reason people drop the hint of multiple offers. It works, and it is logical that it works.

    Definitely agree about unconditional offers. Everyone should be free to dig their own grave.

  30. There are privacy issues with providing the winning bid with copies of the unsuccessful bids. I think the winning buyer should be provided with a list of realtors/brokerages who are submitting bids, but not the details of the bids.

    This is my take on multiple offers

    i/ A part of the reason we are seeing more multiple offers now compared to 10-15 years ago is the insane flow of information. I listed a home earlier this year that was sent to 1413 PCS accounts the minute I clicked “submit listing.” If the home is 5% under market value, buyers and sometimes multiple buyers are all over it.

    ii/ The buyers need to exercise common sense. If I am buying a used Civic off usedvictoria and I offer $10,500 because I feel that is what it is worth am I going to change my offer if the seller calls me up and says she has 5 other offers? No, I am going to stick to $10,500.

    Why buyers try to predict what other bids are doing is beyond me, it makes no sense. Buyers should focus on offering what they are comfortable with within the context of market value.

    iii/ There really is a place for unconditional offers. Unfortunately there are a lot of tire kickers out there. I know just Jack Jack will says, “realtors should screen buyers.” It is easy to screen for finances but if someone wants to be a dick and pull the plug after 10 days of conditions they can and there is no screening for this type of behavior.

    I also feel if I am disciplined with my $ why should I not be allowed to make an unconditional offer? Why force someone who has $ to compete directly with the individual that needs subjects to financing because they only have 5% down?

    Inspection is easy to get around. Most multiple offer situations are being delayed by 2-3 days these days so you can typically get an inspector through the home before the offers are presented. Buyers who have solid financing sometimes do this so they can go unconditional. The risk is you are not the winning bid and you are out $500 for the inspection.

  31. Rising mortgage rates could put damper on housing market

    “Mortgage rates are on the rise in Canada, a trend that could cool the housing market even as the economy struggles to recover from the effects of low oil prices.

    Lenders have already begun boosting their mortgage rates from their September lows. Five-year, fixed-rate mortgages, which represent the largest share of Canadian mortgages, have risen by as much as 20 basis points in the past two months as Canadian government bond yields have moved higher. (A basis point is 1/100th of a percentage point.) Variable-rate mortgages are seeing their first sustained increase since 2012.”

    “With the U.S. Federal Reserve widely expected to raise interest rates next month, Canada’s fixed-mortgage rates could rise by another 60 to 70 basis points, estimates Toronto-Dominion Bank economist Diana Petramala. That could drive down national existing-home sales by as much as 10 to 15 per cent over the following six months, based on how the housing market has historically responded to changes in interest rates and the fact that Canadians have become sensitive to even small increases in mortgage payments, she said.

    The country’s hottest and most expensive markets should feel the greatest pinch from higher rates.”

    http://www.theglobeandmail.com/report-on-business/rising-mortgage-rates-could-put-damper-on-housing-market/article27466110/

  32. There are entire real estate offices that have banned mere postings outright.

    Really? Which ones? Do you mean they banned their realtors from offering the service or they refuse to work with sellers that are using them?

  33. A deal like that should be a no-brainer in a strong seller’s market.

    Should be, but I think the education part is lacking. What people know about real estate they heard from realtors (biased), mortgage brokers (biased), the local news rag (mouthpiece for the industry) and friends (speculation). What’s necessary is a less biased source of information on the process (like HHV!)

  34. And that all bids, and who made them, must be disclosed to the winning bidder within 24 hours of the accepted offer.

    This really needs to happen. I have heard way too many highly suspicious stories about mysterious buyers that are suddenly interested or competing bids that have come up. In my opinion that is incredibly unprofessional on the part of the realtor to ever insinuate if not true.

  35. I think the up front $800 is holding them back.

    I think you are probably correct there. I would hope that most home owners can swing the $800 but the psychological difference between that money going out the door in cash vs extracted out of the abstract concept of home equity is huge.

  36. Marko, you’re absolutely correct: most people are morons. Your hypothetical $2,500 up-front full service package sounds great; I would definitely take advantage of it if I were selling. A deal like that should be a no-brainer in a strong seller’s market.

  37. I think the up front $800 is holding them back.

    As I noted above, if I offered a $2,500 up-front FULL SERVICE package (photos/floorplans/negotiations, etc., etc) and stats showed that 70% of these sold the vast majority of consumers would still prefer to pay $10,000 commission only on completion of successful sale. Let’s assume the success rate on the $10,000 commission is also 70%, for example.

    The average consumer doesn’t have enough common sense to apply grade 7 math to the situation, or they are so strapped for cash they can’t afford $2,500 or they are extremely risk adverse.

    $2,500 x 1/0.7 = $3,571 vs $10,000.

  38. It has been a fabulous couple of months for million dollar home sales in the core since September 1.

    Since then 12 percent of all of the home sales in the core district were over one million dollars. The year before it was only 7.6% and the year before that 6.5%. That means your odds of selling almost doubled!

    If you were trying to sell a million plus home in the core, this was your best chance to do so in the last three years.

    I suppose the bad news is that there are a lot of people trying to sell for over a million these days too. 110 out of 320 (34%) listings in the core are now asking over a million dollars. That’s about 4.5 months of inventory. Which is pretty good with enough selection for most prospective purchasers. The sweet spot for listings being between a million and $1,365,000. If you’re outside of that range – you might want to take a look at reducing your price before Christmas or cancel your listing and re-list in the spring.

    Historically the market enters slow down mode as Christmas and the holiday season starts when the market experiences fewer and fewer sales along with a drop in listings.

    Or maybe this year will be different.

  39. BTW Marko, the thing holding back mere postings in my opinion is people don’t want to deal with the negotiating side. Are you telling clients that they could pay extra and you’d handle offers or something? That’d be a good service I think.

  40. There are entire real estate offices that have banned mere postings outright. I’m sure that’s pretty common which would explain it.

  41. The function of a real estate agent is to facilitate the trade between a buyer and a seller. They may provide value added services such as assisting the buyer in obtaining financing but they don’t create market value.

    The price that a property will sell at is most often within the range of what other similar properties are selling under normal marketing conditions. With or without a real estate agent.

    However, in some instances an agent moves from assisting in a normal orderly liquidation of a property to that of creating an auction environment that is very much in favor of the seller. In a true auction the highest price gets the asset, in this kind of auction the seller can still refuse the highest bid.

    Personally, I don’t think real estate auctions are good for the industry. They add to the misconception of the public, that agents are nothing more than “used car salesman” rather than the professional sales people that they are extensively trained to be. Not that there is anything wrong with used car salesman as quite a few of them have gone on to successful political careers.

    I feel that there should be some restrictions placed on real estate agents when they transgress from facilitating a transaction to creating an auction. They are wearing a different hat and should have different rules and guidelines to follow in order to protect the public and their profession.

    Such as the agency can not represent both the buyer and seller. That the advertising must clearly show the listing is not a typical offering but an auction. That the bids would have an implied subject to acceptable financing and an acceptable building inspection report to be carried out within the next ten days. And that all bids, and who made them, must be disclosed to the winning bidder within 24 hours of the accepted offer.

    I think this would discourage many agents from creating an auction – and that would be good for both the buying public and the real estate industry. This of course would not apply to a developer, they would still be free to do what they want but a licensed agent would still have to follow these requirements if they are working with that developer.

  42. Haven’t seen a huge uptake for mere postings in Vancouver. Toronto is seeing some traction though.

    It is really like anything else in life. You have those that use mere postings, invest their own RRSPs, build their own website using a $49 WordPress template, etc., and you have those that pay 30k to sell a house, are content with a 2% MER for their mutual fund management and are content to pay 5k for a website.

    I just find it shocking how dumb people are with money when you have google. My entire financial success has been based on simple common sense crap. In terms of intelligence I fail out of calculus at Vic High in grade 12 so certainly not incredibly smart.

    People will watch 5 hours of Netflix over the course of a weekend but can’t spend 15 minutes researching MERs online or looking into mere postings. What can I say.

    Anyway, I digress.

  43. Lol, I know full well what a cap rate is. If I had used the gross as you claimed, I would have come up with… 60k/1.25M=4.8%. Did you go to Trump University by chance? 😉

  44. You certainly proved me wrong.

    For some knowing when to sell is not the hardest thing for them to understand.

  45. “Knowing when to sell is the hard part.”

    Really?

    1) Have to move for work
    2) want to move to a better/different place and can afford to do so
    3) too old to keep the place
    4) forced to sell by lack of money or divorce

  46. That isn’t a cap rate. A cap rate is based on the Net Income after expenses not including mortgage payments and before personal taxes. What your doing is just dividing the price by the gross income and that’s called a gross rent multiplier. And even then you’re doing it wrong because you have to allow for vacancy and bad debt in a GRM and it is not expressed as a percentage.

    The GRM is not considered a reliable method of estimating value. It can only be used as a cross check to a final conclusion of a property’s worth because it is so wildly inaccurate. The only reason why it is so popular is because of its simplicity for most of us to understand – not because it is reliable.

    And a cap rate does not tell you if it is a good investment or a bad investment. All that it does is allow you to compare similar properties to each other. And even then you have to look at the expenses to see if a property owner is deferring maintenance to bump the net operating income.

    You can’t compare a cap rate for a property to that of a financial investment. It is entirely wrong to say that an apartment with a 3% cap rate is better than a savings account where you get 1%.

    If you wanted to compare an apartment to a savings account then you would have to calculate the property’s Internal Rate of Return (IRR)

    And if you wanted to determine if it is a good investment or a bad investment then you would have to determine the property’s Net Present Value (NPV) as it relates to your personal objectives. If your objective is to have an IRR greater than the inflation rate plus 1% and the property does not meet that objective then it is a bad investment.

    If an agent or an appraiser would make these type of claims of a return they would get raked over the coals and possibly face punitive action for misleading their client or deceptive advertising by their respective organizations. But for some reason developers and real estate seminar gurus don’t often get called out on these misleading claims and deceptive practices.

    https://youtu.be/PWBZha_AXIk

  47. Yeah, unfortunately, Marko, I don’t know that Victoria represents the most innovative or entrepreneurial side of the homebuyer/seller demographic. I would guess more uptake for alternative models in Vancouver maybe? Any idea if the trends you’re seeing here are matched elsewhere?

  48. Depending on where one makes the cut off date for this month’s stats will make a big difference in the median and averages for houses in the core.

    Since the 1st of the month the core has had 107 detached homes sales. Depending on weekends and holidays there may be a lag of a few days reporting sales. If you back date your data by 5 days then you’ll get a reasonable indication of market activity projected for the month of November. In this case it would be from the 19th of October to the 19 of November and that would indicate 173 sales. The closer the sample is to the end of the month the more reliable the projection.

    Last month we had a considerable number of high end sales in the last week or so of that month that really skewed the data.

    So far this month the 107 homes sales indicate a median of $611,000 and an average at $719,000 for the month. But if you back date the data by five days then the median for the last 30 days goes to $665,000 and the average to $801,000 because of those high end sales. That’s a really big difference that could alter your perception on if it is a good time to buy or a good time to sell.

    And this is the reason for the Home Price Index (HPI). It is suppose to reduce the skewing of the data. The HPI uses a hypothetical house with certain physical aspects and tracks that home’s price through time. But that only tells you how that benchmark home is performing. What it doesn’t tell you is how your specific property may have increased or decreased. The HPI would be most relevant for a typical property like the Gordon Head box. It will be less reliable for starter homes and mansions or anything outside of the norm like acreage and waterfront.

    It is possible to determine how your specific property has performed over the years. Say since 2000 and along as there has not been a major infrastructure change in your immediate area. That might be helpful for those that own rental properties to determine if prices are accelerating or decelerating for their specific investment. Generally you want to hold real estate if the price velocity for your investment is stable to increasing. And sell when the price velocity is decreasing. The longer you hold the investment at zero or a decreasing price velocity the lower will be your rate of return over the ownership period. This may be important to you If your intention is to maximize your rate of return.

    Buying property is the easy part. Knowing when to sell is the hard part.

  49. Mon, Nov 23, 2015 8:00am:

    Nov Nov
    2015 2014
    Net Unconditional Sales: 415 465
    New Listings: 556 682
    Active Listings: 2,986 3,631

    Please Note
    Left Column: stats so far this month
    Right Column: stats for the entire month from last year

  50. Maybe in Quebec it’s different when there’s a critical mass, but here I think you’d be totally nuts not to list on Realtor.ca in order to save a couple hundred bucks.

  51. In Toronto commission may be 5% so 600k house = 30k. In Victoria commission may be 6%100k+3%100k so 600k house = 21k.

    The extra 9k makes a difference. Also in big markets like Toronto you can run a company dedicated to mere postings or other alternative business models. In Victoria you wouldn’t be able to keep a company afloat at 72 mere postings per year.

    72 mere postings this year/11,901 listings in total VREB.

  52. Could be? The demand for mere postings has been so abysmal in terms of growth that I haven’t paid attention to competitors. Interestingly enough my market share has gone for 29/81 in 2013 to 46/72 YTD in 2015 and I am placing way less emphasis on that part of my business.

    Unless we get some crazy surge in December mere posting listings are on the decline. That’s the common sense of the consumer; market goes hot, mere postings decline?

  53. This is confusing to me as well. In other parts of the country, ComFree is pretty popular. If you go to their website, you will see they have 246 homes listed for Manitoba, 970 properties in Alberta, 8 in NB, 2 in NS, 1495 in Ontario, 347 in SK and 23,400 in Quebec!

    As for all of BC, 36.

  54. That is amazing to me as well. At the very least I would have thought mere postings would have destroyed companies like propertyguys. Why would anyone in their right mind forgo MLS exposure for a few hundred dollars?

    PropertyGuys offers mere posting MLS® type services.

    Is a buyer limited to local realtors when doing a mere posting?

    I think you mean seller? The seller can use any licenced brokerage in BC to do a mere posting. There have been 72 mere postings this year within the VREB, I’ve personally listed 46 of these and of the remaining 26 mostly out of town companies with the exception of few. I think there is an advantage/value to having a local REALTOR® swing by the house but that is just my opinion.

    Its also a net negative for you so neither party is interested. I think the undercutting at this point requires a new realtor that needs to build his empire.

    Doesn’t paint the entire picture. So I made $8,000 off “Joe,” the buyer, showing him 15 properties. I also spent three years with Bob and Suzy and showed them 50 properties only to have them change their mind and move to Mexico. Guess who is paying for Bob and Suzy? Joe.

    My theory is if I charged Joe $100 per showing, for example, Bob and Suzy would be replaced by Joe’s serious buyer friend Dave who is also willing to pay $100 per showing. The net negative on my end would be small, the net positive would be huge for Joe.

    I still hold out hope that people will get there. The generation that is used to doing everything online is just starting to get into their home buying years. For the older generation it was comforting to get carted around in a jaguar and told about what to buy.

    I am not optimistic at all. Doing everything online doesn’t help with common sense.

  55. I honestly thought mere posting, for example, would blow up in 5 years and would be around 10% market share today and I was 100% wrong. Mere postings are still well under 1% market share

    That is amazing to me as well. At the very least I would have thought mere postings would have destroyed companies like propertyguys. Why would anyone in their right mind forgo MLS exposure for a few hundred dollars?

    I am the only local REALTOR® (to the best of my knowledge) offering mere postings

    Is a buyer limited to local realtors when doing a mere posting?

    Take $16,000 – $2,800 = $13,200 net cash back instead of $8,000.

    His reply was “no way” as he would have been too stressed out to go out and take a look at 3 homes burning through $300.

    Its also a net negative for you so neither party is interested. I think the undercutting at this point requires a new realtor that needs to build his empire.

    I would go with the $2,500 option any day of the week based on the probability 101 class I took at Uvic back in the day but that is not the norm.

    I still hold out hope that people will get there. The generation that is used to doing everything online is just starting to get into their home buying years. For the older generation it was comforting to get carted around in a jaguar and told about what to buy. For me that sounds awful and I think the developments in other industries shows people are preferring automated services more than interacting as much with a domain expert.

  56. “How could contracts be structured to avoid realtors being incentivized to shortchange sellers?”

    The government did their job 5 years ago….”OTTAWA, October 24, 2010 — As a result of an agreement ratified today by members of the Canadian Real Estate Association (CREA), Canadians will have the ability to choose which services they want from a real estate agent when selling their home, and to pay only for those selected services. At the same time, the consent agreement between the Competition Bureau and CREA will ensure that real estate agents have the flexibility to provide innovative service and pricing options to customers. The agreement will be filed with the Competition Tribunal and effective immediately.”

    I left my existing brokerage at that time and moved over to Fair Realty where the fee structure was such (very low) that I could offer mere posting, cash back, etc.

    I honestly thought mere posting, for example, would blow up in 5 years and would be around 10% market share today and I was 100% wrong. Mere postings are still well under 1% market share and I think I am the only local REALTOR® (to the best of my knowledge) offering mere postings?

    There is just zero apptitie from the consumer to do various fee for service setups such as mere postings. The consumer wants a commission structure and there is the problem. As long as you have commissions you have an human nature incentive at the end of that commission.

    I have discussed a fee for service type approach with a lot of my clients over the years. For example, last year I helped a client purchase a fairly expensive home and we split the $16,000 commission in half. I took $8,000 and gave him $8,000 cash back. We got into a discussion of would he have used my services if I was charging, as a hypotheticaly example, $100 per showing, $300 to write up an offer, and $700 for the condition removal and invocing my showings/failed offer cost at the end of every month and all the commission on completion went back to him. In his case it would have worked out to 15 showings so $1,500+$300 (first offer didn’t pan out)+$300+$700 = $2,800. Take $16,000 – $2,800 = $13,200 net cash back instead of $8,000.

    His reply was “no way” as he would have been too stressed out to go out and take a look at 3 homes burning through $300.

    Exact same concept applies to a selling home. If you told a seller the odds of your home selling in this market are 75% (based on the current list to sales ratio) and I’ll charge up front $2,500 for the FULL SERVICE (not a mere posting) listing portion the vast majority of sellers would still go for the $10,000 listing portion of the commission that is only payable upon successful sale.

    I would go with the $2,500 option any day of the week based on the probability 101 class I took at Uvic back in the day but that is not the norm.

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