What Realtors hate about this sellers’ market

Realtors have some beefs with this market

Most will think that Realtors must be rejoicing in this sellers’ market and that it is just a matter of fast sales and big commissions.  Must be “easy street”, right?  In reality, I think we would find that the larger % of real estate professionals would be happy to see a more “balanced” market that features a more equal number of buyers and sellers.  While it is true that listings sell quickly and for top dollar, there are many aspects to this market that cause Realtors heartburn, if not heartache.

Not a lot of listings to go around:
At the end of January 2020, there were something like 2,100 residential listings posted on the Ottawa Real Estate Board.  When you compare that to almost 3,100 members that means there are not a lot of listings to go around.  Given the real estate mantra of “you list to exist”, this means many Realtors are scrambling for fewer listings and those listings sell quickly, so the marketing reach and prospect generation value of those listings is very limited.  If fewer listings=fewer sales, then despite rising prices, there may be fewer commission dollars being earned out there by many Realtors.

Being on top of new listings and immediately available for showings:
Finding a property for qualified buyers, always has its challenges but these are magnified 10 times in this sellers’ market environment.  Buyer agents have to be really on their toes and alert to pending listings and being available to immediately get their buyers in to see new listings.  The watchword in this market is “you snooze, you lose” and if a buyer misses a property and their perception is that it is their agents’ fault, the agent could potentially lose that buyer.  This results in buyer agents doing a lot of “one-at-a-time” showings, whenever a new property of interest comes out on the market, which is pretty time consuming and may require a lengthy search period, particularly if buyers have a pretty tightly defined geographic, property or price point criteria.

Many showings and offer submissions:
The supply/demand imbalance has resulted in multiple offers in 35-50% of listings, so buyers’ agents invest a lot of time in researching listings, doing showings and preparing offers on properties, only to lose out to other more aggressive buyers/agents.  This can be very disheartening and frustrating for buyers.

No time to decide and hasty decision making:
Buyers often get only one chance to view a property and after a 30 to 40 minute visit then make a critical decision on their largest purchase?  This alone has pushed the numbers of conditional sales that fall through to double or more the regular rate.  (easily 10% of conditional sales are falling through over the last year)

How do you figure out a price in this “crazy” market?
Buyers and sellers count on Realtor expertise to establish appropriate list prices when selling and also what offer price (and terms) is necessary to be successful in submitting an offer on a listed price for a buyer.  The listing side is somewhat easier, in that the market and collective buyers will determine the market value, so there is less pressure on the listing agent.

Realtors normally do extensive research on comparable properties sold but in this market, much of it becomes old news and even a sale a month ago, may no longer be very useful in providing guidance on what to offer for buyers on a current listing.  If buyers are not successful over a period of time they may choose to blame their Realtor or they may refocus their search in a different geographical area or property type that is not as readily serviced by the buyer agent. Ie. New construction, out of town properties.

Temptation to go “all in” with a “no condition offer”
Though highest price still generally rules, offer terms are always a critical component and a totally “clean” offer with few/nil conditions, is bound to surface in the most sought after listings.  Most sellers don’t mind waiting for a week or so if the price offer is significantly better but many are happy to know that they accept the offer and their house is sold.  This is why we see so many listings with offer dates then showing up as “sold firm”, the next day after offers are due.

We had a buyer last year, who actually offered $25K less than at least one other offer but our buyer won, since our offer had no conditions and a 30 day closing which was a critical factor for that particular seller.  This place was a total fixer upper and not including an inspection clause, was a risk our experienced reno buyer was prepared to accept.  Many buyers (and their agents) are just not able to do this and of course, the risks can be significant.

New construction sales are very strong:
Though we don’t have proper stats on this, we believe there are a larger % of sales being done in new construction than normal right now.  This is partially due to the limitations on resale listing inventory and also the fact that new construction options are plentiful and widespread.  (though delivery dates may be getting pushed out by some builders)

Buyers actually start gaining equity, the day they sign their builder sales agreement, even though their possession date may be a year away.  Those with existing homes to sell, are effectively “double dipping”, as both the new construction property “on order/to be built” is gaining in value, as is their existing property which they will only sell close to the possession date.  With prices rising 8% or 9% in 2019 and 5% or 6% forecast for this year, these homeowner/buyers are earning a nice tax free equity bump on both properties.

A surprisingly small % of new construction sales involve Realtors (perhaps as low as 15 to 20%) where resale buyers are represented by Realtors at least 80% of the time.  On top of that, builders do not offer the same level of Realtor compensation, as do MLS® listings, so Realtor paydays are much less when their buyers are buying a new construction property.

Builder compensation for Realtors tends to ebb and flow with the ups and downs of the market.  In tough times, builders are mostly happy to see buyer agents with their buyers but in this market, most builders view Realtors as a cost factor to be minimized or eliminated.

Managing showings and multiple offers:
Listings are getting a lot of attention, of course but this can put a load on a listing agent.  Lots and lots of showings, phone calls, texts and emails from prospective buyers and also buyer representatives.  There are strict rules to follow in properly and fairly managing offer processes and this takes a lot of organization and discipline on the part of the listing agent.  While it is fun to provide an over list price offer to your seller, having to make the calls to other agents whose buyers were unsuccessful is not nearly as much fun.

Buyer agents can be very aggressive in representing their clients and this can result in some not so fun moments, too.

Managing “bully” offers (those submitted prior to offer date) and multiple offers can be challenging. Any time there are many losers and only one winner, frustration and tension can be high.

Overlapping showings:
As a buyer representative, one is almost always stuck with overlapping showings with another buyer agent and their buyers in the property in the same time window.  Normally, this is not too difficult to manage but with the volume of showings on many properties right now, it can be tough to get an appropriate amount of time to have a really good look at a property in private and communication between agent and buyer is constrained when others are also in the property.

So while our challenges in this market are vastly different and more positive than the other side of spectrum in a buyers’ market, it is not all easy days and big commissions for Realtors in this sellers’ market.  Your Realtor will have adapted to these market conditions and help you navigate these oft choppy waters.

 

Gord McCormick, Broker of Record
Dawn Davey, Broker Oasis Realty Brokerage
613-435-4692 or mobile 613-371-9691
oasisrealty@rogers.com www.oasisrealtyottawa.com
https://www.facebook.com/oasisrealtyottawa
@OasisrealtyOTT
http://blog.oasisrealtyottawa.com/  

Just how many Realtors do we have in Ottawa?

…and do we need this many?
There are just shy of 3,100 Realtors in the Ottawa Real Estate Board (OREB) at time of writing. This is one Realtor for every 322 residents in our City of a million population and one for every 129 residences in the city. (Based on 400,000 residences-an approximation)

This doesn’t count the Quebec side, as real estate is regulated provincially, so there is a completely different real estate market on the other side of the river.

If you think this sounds like a lot of Realtors, how about Toronto?  The Toronto Real Estate Board (TREB) references over 53,000 members, serving the GTA and its 6 million plus population.  This works out to 1 Realtor for every 113 residents or almost triple the concentration here in Ottawa.

What do Realtors think?
Most Realtors would agree that there are far too many agents, far too many part time or inexperienced agents and far too many poorly trained agents, doing 0-2 deals a year and just too many poorly qualified agents that reflect poorly on the industry as a whole.

 Why are there so many agents?
Relatively easy access to industry and potential for significant income: The barriers to entry in real estate have always been relatively easy, with a suite of courses to be taken and minimum hurdles to pass and obtain registration to trade in real estate. The potential for significant income is available from day 1, too and does not necessarily require years of apprenticeship to realize an uptick in income.

This is helpful for franchise broker networks, too-as they need an ever increasing supply to agents to optimize their profits.  Realtors are independent contractors typically on 100% commission and are highly mobile and quite often move from broker to broker or out of the industry.  So while no Broker of Manager would say they subscribe to the “masses of asses” philosophy, there is certainly a need for brokerages to maintain and grow their headcount to remain profitable.

  • Population growth and geographic range:
    Our population has grown and with that the number of homes, condos and commercial and industrial properties, therefore more professionals are needed to service this growth.  Ottawa is spread across 2,800 sq. km and incorporates urban, suburban, exurban and rural areas plus numerous smaller villages and communities, many with their own somewhat unique real estate needs.  This alone dictates a wide network of professionals is required.
  • Specialization:
    The increasing complexity of the real estate marketplace and our geographic sprawl, has meant increasing levels of specialization for Realtors, in order to become experts in a particular market, be it geographic or vertical or by property type.
  • Volume of business:
    Our business volume in Ottawa has grown significantly, doubling the number of residential transactions completed over the last two decades and given the labour intensive nature of the business, this necessitates additional personnel.
  • Service levels:
    Buyers and sellers require a highly responsive and available Realtor on their team, so there are limits to how many clients and customers a Realtor can successfully engage at any one time.
  • Large numbers of Realtors paying fees keep costs down for all:
    Given that Realtors are on commission, there is not a huge $ cost for a brokerage to carry a Realtor, and all have quota’s and franchise fees and other overheads to pay, so there is a bias to having more rather than fewer Realtors contributing to overheads.

Even those Realtors who say there are “way too many Realtors”  benefit from the fact that their own fees are much lower when 3100 Realtors are splitting Board fees (for example) compared to what it would cost them, if there were only 1,000.  But believe me, if these same Realtors had to pay 3x the fees for insurance, provincial and national association fees, provincial registration fees and broker splits…they would not be in favour

Demographics and diversity:
Internal migration and a wave of new immigrants to Canada, have both helped fuel Ottawa’s growth and also its Realtor population.  Home buying and selling is often quite tightly aligned with cultural, religious, nationality, language or other demographic group and our Realtor ranks have grown significantly to reflect this.

Realtor population fluctuates:
Being commission based, the Realtor population can fluctuate widely.  Though Ottawa is one of the most stable markets in Canada, we have had some historic highs and lows, brought on by adverse economic conditions.  At the end of the 1980’s and what had been a very strong period for real estate, the Ottawa Board had 2,566 members…a pretty robust number!

This changed quite dramatically through recession and government cutbacks in the 1990’s, where the Realtor population contracted to only 1,341 members by the end of 1996…a 47.7% drop. It would take until 2009 to get back to the total membership number two decades earlier!

With low mortgage rates and continued growth in Government and high tech in Ottawa, the Board has grown from 2,547 at the end of 2009 to our current level of 3,078, though the numbers look to be pretty flat going forward.

Bottom line:
While there are certainly some good arguments for fewer, better trained and more professional Realtors, we believe that the fact that there is a healthy, thriving and robust Realtor and Brokerage industry is indicative of the health of the overall market and provides more choice and competition for consumers.

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage 613-435-4692  oasisrealty@rogers.com

What can you do when a Realtor behaves badly?

Most people have either had a personal experience or heard an outrageous story about nefarious Realtor conduct or practice.  Our Realtor only Facebook page is full of them and believe me, the Realtor community is furious with this type of behaviour, as it tends to tarnish all in the profession.  Most real estate professionals and brokerages operate fastidiously within the myriad of rules, regulations and policies that govern professional real estate. (more on this later)

But what is a consumer to do?

Consumers have many options they can pursue:

Speak with the offending Realtor directly and try to clear the air or gain some remedy from the perpetrator.
Contact that brokerage manager or Broker of Record (who is in most cases, also the owner)

  • Contact the Ottawa Real Estate Board and lodge a complaint. The Board has its own Discipline Committee and quasi-judicial processes and has recently begun to fine members for a variety of offences under Board rules and MLS® policies.
  • Contact the Real Estate Council of Ontario (RECO) the regulator and licencing authority for real estate in Ontario. RECO has sweeping powers including the ability to levy large* fines, licence suspensions and even criminal charges. *one prominent Ottawa broker was fined over $200,000 several years ago for obstructing a RECO investigation and falsifying records.
  • Contact a lawyer to see if there are grounds for a legal case.

Many, many pieces of legislation affect activities around professional real estate (which is one of the problems) and those with a beef may have a difficult time sorting out who to contact.  If it is a rental matter, then it might be to the Rental Housing Tribunal.  If a privacy matter, the federal Privacy Commission.  Aggressive and unwanted or unauthorized marketing may require a complaint to the Competition Bureau or the CASL (anti-spam) folks whichever Federal Department they may happen to be with.  Real Estate sign issues are a City of Ottawa bylaw matter and so on and so on…

Why it is difficult to curb bad Realtor behaviour:
We mentioned earlier that the core of the Realtor community is furious with the egregious behaviour attributed to some members and one must wonder: “so why isn’t something done about it…why don’t more people complain?

Though many are involved in managing and regulating the profession and many positive steps have been taken, there is still a long way to and any commission sales environment with relatively easy access, high commissions and large numbers of members, will have its share of those who deviate from the overall standards.  The rewards are just too good and the enforcement is often deemed lacking, so some Realtors must say to themselves: why shouldn’t I do what gets me more business and commission?

Barriers to enforcement and complaint resolution:

  • Consumers most often do not want to get involved with a formal or legal complaint which can take a lot of time and energy and possibly money. Most consumers do not even know all the rules, either or more would complain.
  • There are so many bodies and legislation surrounding organized real estate that it is very difficult to identify which rule, regulation or law has been broken and whose jurisdiction a complaint must be filed with.
  • Processes for various organizations are long and involved and often stop complaints before they are even heard. RECO for example, takes consumer complaints very seriously but is not able to manage Realtor complaints on what are considered minor issues, so they defer these mostly back to the originating locale. For example, as a Broker of Record, I cannot refer a discipline matter to RECO unless I have already communicated and discussed the issue with the perpetrators Manager or Broker of Record.
  • There is a bit of a “live-and-let-live” approach to most common Realtor misbehaviour, on the grounds that we have to work with these people in the future, so why spoil the realtor-realtor synergy that may be needed to do a future deal. Also, as one must identify oneself to make a complaint, many can be concerned about potentially “putting a target on their own back”  and are concerned with possible reprisals from the complaint target agent.

We will write about our many “Broker beefs” via broker rant reports, future posts.  We also welcome any notes, questions or comments on things you have seen or wondered about concerning Realtor activity and behaviour.

Regards,

Gord McCormick, Broker of Record
Dawn Davey, Broker Oasis
Realty Brokerage Ottawa, Canada
613-435-4692 oasisrealty@rogers.com