Part Six: Transparent Negotiations
Author: Jeff Agyemang
Dated: Wednesday, April 24, 2019
The recent seller’s market in the GTA ended in April 2017 when the provincial government announced a foreign buyer’s tax. Before that, homeowners had seen a consistent increase in the average price of a home rise from $198,150 in 1996 to $822,580 by the end of 2017. The average home price is currently $807,340 (as of November 15, 2018), and that’s significant because we haven’t seen a year over year drop in price since 1996 when the average price dropped by $4,878 from the previous year. Couple the foreign buyer’s tax, new mortgage rules (CMHC rules came into effect as of January 2018), rent control regulations and regulations around realtors double ending deals, and you get an environment where buyers got to step back and assess what was happening in the market.
Euphoria took over GTA real estate, with multiple offers and selling prices $100,000 over asking becoming the norm. Hot seller’s markets put a lot of power into the hands of sellers because demand for homes has dramatically outpaced supply. For example, there was a home in Oshawa that had my attention in 2015. A gorgeous 3 bedroom and 3 washroom detached home, just under $350,000 had come to market. I put in an offer right after I got a chance to look through the home and found myself competing with 17 other offers. The home ended up selling for $465,000 a day later. I hadn’t expected bidding wars to travel that far east of Toronto so soon but there they were! A very frustrating and stressful environment for buyers to be in, but that was now the market.
I realized that it was only frustrating because buyers were trying to navigate through an environment where they had only a fraction of the information. You don’t get to see the other offers made on a property; unless you are the listing agent. In a hot seller’s market, that led to a lot of scenarios that put buyers at a big disadvantage, like:
· multiple representation situations where a consumer is unsure where “their agent’s” fiduciary responsibility would be, and;
· tactics to list a home well under market value and spark bidding wars driving the homes valuation up
Consumers were awoken to the lack of transparency regarding real estate transactions, especially when it came to the offers and the negotiation part of the process. Transparency became a big talking point and point of focus for many innovate companies, both in Canada and the US.
Reali.com, a real estate technology company based in California, offers consultations to users to review pricing, market and sale conditions, and be presented with an executive summary of all disclosures regarding the home. From there users can use the Reali app to submit an offer, on their own (reviewed by their consultant), directly to the seller. You’re literally done in 5 steps: enter your offer price, deposit amount, select your conditions (i.e. financing and home inspection condition, offer expiration date, etc.), any notes for your consultant, sign and done! Your offer is sent in for review and, when approved, sent to the seller. More control over your future with some guidance by a professional. Familiarizing clients with
how to put in a bid is a great way to get them more involved in the process. However, a Toronto based realty company is taking the bidding process to another level.
Enter On The Block Realty. Their auction platform delivers all pertinent information needed for a purchase decision (i.e. home inspection, comparable property statistics, and consistent terms of sale) to a qualified buyer looking to make an offer. Bids by all parties are visible to any who have been qualified (based of mortgage preapproval) providing much needed transparency to one of the most important parts of the real estate process. On The Block is offering a level playing field for buyers by helping them make decisions with more of the facts.
A streamlined bidding process is needed with the amount of real estate transactions being completed nowadays, and a larger buyer pool fighting for high valued property. Buyers become more confident in their decisions when they are educated on the product, process or both! With the Mobile Age of Real Estate taking over, we’ve entered a new world where transparency should become the norm. New technologies are leading this front, and one may affect change in everything from showings, contract negotiations, to the way we even transfer title/ownership of our homes. You may have heard of it… a little thing called blockchain...