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.
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